[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
HEARING ON IMPLEMENTATION OF
HEALTH INSURANCE EXCHANGES AND RELATED PROVISIONS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
September 12, 2012
__________
Serial No. 112-HL15
__________
Printed for the use of the Committee on Ways and Means
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80-694 WASHINGTON : 2013
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COMMITTEE ON WAYS AND MEANS
DAVE CAMP, Michigan, Chairman
WALLY HERGER, California SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas CHARLES B. RANGEL, New York
KEVIN BRADY, Texas FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut
TOM PRICE, Georgia EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida RON KIND, Wisconsin
ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois SHELLEY BERKLEY, Nevada
LYNN JENKINS, Kansas JOSEPH CROWLEY, New York
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York
Jennifer Safavian, Staff Director and General Counsel
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON HEALTH
WALLY HERGER, California, Chairman
SAM JOHNSON, Texas FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin MIKE THOMPSON, California
DEVIN NUNES, California RON KIND, Wisconsin
DAVID G. REICHERT, Washington EARL BLUMENAUER, Oregon
PETER J. ROSKAM, Illinois BILL PASCRELL, JR., New Jersey
JIM GERLACH, Pennsylvania
TOM PRICE, Georgia
VERN BUCHANAN, Florida
C O N T E N T S
__________
Page
Advisory of September 12, 2012 announcing the hearing............ 2
WITNESSES
The Honorable Michael Consedine, Commissioner, Office of the
Commissioner, Department of Insurance.......................... 8
E. Neil Trautwein, Vice President, Employee Benefits Policy
Counsel, National Retail Federation............................ 22
Daniel T. Durham, Executive Vice President, Policy and Regulatory
Affairs, America's Health Insurance Plans...................... 30
James F. Blumstein, University Professor of Constitutional Law
and Health Law & Policy, Vanderbilt Law School................. 47
Heather Howard, Director, State Health Reform Assistance Network,
Lecturer In Public Affairs, Woodrow Wilson School of Public and
International Affairs, Princeton University.................... 58
HEARING ON IMPLEMENTATION OF HEALTH INSURANCE EXCHANGES AND RELATED
PROVISIONS
----------
WEDNESDAY, SEPTEMBER 12, 2012
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The subcommittee met, pursuant to call, at 3:20 p.m., in
Room 1100, Longworth House Office Building, the Honorable Sam
Johnson presiding.
[The advisory of the hearing follows:]
HEARING ADVISORY
Chairman Herger Announces Hearing on Implementation of Health
Insurance Exchanges and Related Provisions
Wednesday, September 5, 2012
*UPDATE: NEW TIME*
ALL OTHER DETAILS OF THE HEARING REMAIN THE SAME.
House Ways and Means Health Subcommittee Chairman Wally Herger (R-
CA) today announced that the Subcommittee on Health will hold a hearing
to examine implementation of health insurance exchanges as authorized
by the Democrats' health care law (P.L. 111-148 and 111-152). The
hearing will take place on Wednesday, September 12, 2012, in 1100
Longworth House Office Building, beginning at 2:30 PM.
In view of the limited time available to hear from witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Subcommittee and
for inclusion in the printed record of the hearing. A list of witnesses
will follow.
BACKGROUND:
The Democrats' health care law calls for the creation, operation,
and regulation of health insurance exchanges. The health care law
states that exchanges must meet minimum operational standards, provide
for the certification of qualified health plans (QHP), and facilitate
Medicaid and plan enrollment.
The health care law requires states to establish exchanges, in
accordance with federal law and subsequent regulations, by January 1,
2014. Eligibility for premium and cost-sharing subsidies, which are
financed through cuts to Medicare and tax increases on families and
employers, are tied to enrollment in a QHP offered in state-established
exchanges. If a state is unwilling or unable to establish an exchange,
the law authorizes the Secretary of Health and Human Services (HHS) to
establish a federal exchange within the state. States have until
November 16, 2012, to declare their intentions.
Open enrollment in the exchanges begins on October 1, 2013. Plans
are required to be certified as a QHP prior to open enrollment.
Additionally, enrollment is predicated on the establishment and
operation of information technology infrastructure, referred to as the
data hub, to accurately and reliably transmit sensitive personal data.
Prior to open enrollment, states, insurers, and other federal agencies
need to conduct tests with the data hub, to ensure citizenship, income,
plan enrollment, and other data necessary for eligibility
determinations can be transmitted accurately and securely. This is
clearly a significant undertaking.
However, to date, the Obama Administration has failed to publish
final regulations to guide states, employers, and health plans as to
what will be expected of them when open enrollment begins, including
regulations on mandated benefit packages, new insurance regulatory
mandates, expected enrollee costs, and much of the exchange-related
information. Instead, the Administration has often relied on
``bulletins,'' which are not enforceable by law and are issued without
first conducting a rigorous cost-benefit analysis.
Between 2012 and 2022, the Congressional Budget Office (CBO) and
Joint Committee on Taxation (JCT) estimate exchanges will process more
than $1 trillion in premium and cost-sharing subsidies. Additionally,
exchanges are also responsible for facilitating Medicaid enrollment,
which CBO and JCT estimate will result in an additional expenditure of
more than $640 billion.
In announcing the hearing, Chairman Herger stated, ``In just over a
year, the Democrats' health care law is slated to begin funneling more
than $1.6 trillion in taxpayer and Medicare beneficiary and provider-
funded subsidies through state-based insurance exchanges. However, the
necessary regulations for exchange operation, plan design, and
eligibility still have not been finalized by the Obama Administration,
leaving many to question whether political motivations are delaying the
release of much-needed guidance for states, employers and health plans.
Such uncertainty threatens to saddle stakeholders with higher costs and
also increases the risk of waste, fraud, and abuse. Given this massive
undertaking, the hearing will allow the subcommittee to hear about the
progress and the pitfalls associated with this unprecedented expansion
of government into America's health care system.''
FOCUS OF THE HEARING:
The hearing will focus on the implementation status of health
insurance exchanges and related regulations.
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Please Note: Any person(s) and/or organization(s) wishing to submit
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for the record.'' Once you have followed the online instructions,
submit all requested information. ATTACH your submission as a Word
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by the close of business on September 26, 2012. Finally, please note
that due to the change in House mail policy, the U.S. Capitol Police
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For questions, or if you encounter technical problems, please call
(202) 225-1721 or (202) 225-3625.
FORMATTING REQUIREMENTS:
The Committee relies on electronic submissions for printing the
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The Committee seeks to make its facilities accessible to persons
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call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
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Note: All Committee advisories and news releases are available on
the World Wide Web at http://www.waysandmeans.house.gov/.
Mr. JOHNSON. We are going to bring the subcommittee to
order. We have got two guys in here, the two most important
ones in the whole Congress.
Let me say our thoughts are with the Health Subcommittee
chairman Wally Herger as he continues to recover in California
from a hip replacement surgery and a recent bout with the flu,
and I speak for all of us when I say we wish him well and hope
for a speedy recovery.
We are here today to discuss implementation of Obamacare
insurance exchanges and related provisions, and I want to thank
our witnesses for your flexibility so we will be able to hold
the hearing today, and thank you for sticking around. I
appreciate it.
In the interests of time and to accommodate our witnesses,
I ask unanimous consent that my opening statement be made part
of the record. Do you agree to that?
Mr. THOMPSON. Absolutely.
Mr. JOHNSON. And Mr. Stark isn't here yet, so, without
objection, I would ask that you make his opening remarks part
of the record as well.
Mr. THOMPSON. Absolutely.
Mr. JOHNSON. Thank you, appreciate that.
Today we are joined by five witnesses, and given the home
State ties, I will yield to the gentleman from Pennsylvania to
introduce our first witness. Go ahead.
Mr. GERLACH. Thank you, Chairman Johnson, for giving me the
opportunity to introduce my fellow Pennsylvanian, Insurance
Commissioner Michael Consedine. Last year Michael was appointed
by Governor Tom Corbett to serve as our insurance commissioner
for the Pennsylvania Insurance Department and was confirmed by
the Pennsylvania Senate back in April of last year.
The Insurance Department of Pennsylvania administers the
laws of the Commonwealth as they pertain to the regulation of
the insurance industry in order to protect insurance consumers.
Given that Pennsylvania is the fifth largest insurance market
in the United States and the 14th largest insurance market in
the world, Michael certainly has his work cut out for him when
you add it to the implementation of the State exchanges under
the Affordable Care Act.
Throughout his legal career he has concentrated his
practice on regulatory and corporate matters involving
insurance entities and consumers. From 1995 to 1999, he served
as department counsel for the Pennsylvania Insurance Department
where he represented the department in an array of litigation
proceedings and on transactional filings, including major
corporate restructurings. He has also practiced law with the
firm of Saul Ewing in Philadelphia, where he was a partner and
vice chair of its insurance practice group.
He is a graduate of James Madison University as well as the
Widener University School of Law, and given his vast experience
and knowledge in the industry, he is an important asset to our
Commonwealth. So we want to welcome him to the panel today and
thank him for testifying on this important matter.
Yield back. Thank you, Mr. Chairman.
Mr. JOHNSON. Thank you.
Also testifying today are Neil Trautwein, vice president
and employee benefits policy counsel at the National Retail
Federation. Thank you for being here. Dan Durham, executive
vice president of policy and regulatory affairs at America's
Health Insurance Plans; Jim Blumstein, professor of
constitutional law and health law and policy at Vanderbilt Law
School, director of Vanderbilt's Health Policy Center; and
Heather Howard, director of State Health Reform Assistance
Network and lecturer in public affairs at Princeton
University's Woodrow Wilson School of Public and International
Affairs.
Thank you all for being here. You will each have 5 minutes
to present your oral testimony, and your entire written
statement will be made a part of the record.
[The Opening statement of follows: The Honorable Pete
Stark]
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Without further ado, Commissioner Consedine, you are
welcome to begin.
STATEMENT OF THE HONORABLE MICHAEL CONSEDINE, COMMISSIONER,
OFFICE OF THE COMMISSIONER, DEPARTMENT OF INSURANCE,
HARRISBURG, PENNSYLVANIA
Mr. CONSEDINE. Thank you very much, Mr. Chairman.
Thank you for that introduction, Representative Gerlach.
Good afternoon, distinguished members of this committee. My
name is Michael Consedine, and I am Pennsylvania's insurance
commissioner. As some of you may know, I had the privilege of
presenting testimony in front of your colleagues on the
Committee on Energy and Commerce in March of last year about
our experiences in Pennsylvania with the first year of the
implementation of the Affordable Care Act. In that testimony I
described Pennsylvania's early experiences with the ACA as
traversing a path that was marked by a lack of clear direction
and troubling indications of the terrain ahead.
Unfortunately, in the 18 months that have followed, very
little has changed. We still lack clear direction, and the
flexibility promised us has not materialized, something that at
this point poses a significant barrier to our ability to make
informed decisions on issues that could impact the lives of
millions of Pennsylvanians.
To date, the Department of Health and Human Services has
failed to issue numerous regulations regarding how States are
to implement the ACA. Most of these outstanding regulations
address critical issues on the operation and requirements of
key components of the ACA, like health insurance exchanges. The
lack of detailed information from HHS has put Pennsylvania and
many other States in a very difficult position. We are
traveling down a road directionless while knowing the road will
soon end. Pennsylvania, like many States, needs final rules and
guidance on exchanges in order for us to determine what course
is in the best interest for our State.
These concerns and the absence of clear guidance prompted
me to write a letter to Secretary Sebelius 2 weeks ago
outlining 26 specific questions that we in Pennsylvania felt
needed to be answered in order for us to make an informed
decision on exchanges. I have submitted a copy of that letter
to the committee for inclusion in the record. As of the date of
this testimony, HHS has not responded to our letter.
Pennsylvania is not an outlier in feeling directionless on
this road. Recently I was asked to chair a National Association
of Insurance Commissioners working group charged in part with
collectively identifying the universe of unanswered questions
and issues with exchanges in order to help other States begin
to better understand the impact the operation of a Federal
exchange may have on the insurance markets. We have yet to hold
our first meeting, but already 22 States have signed up to
participate in this working group.
A poorly executed Federal exchange launch and transition
from current market rules to the new ACA rules could result in
severe market disruptions and a weakening of States' control
over their insurance markets. Continuing without answers to
these crucial issues is like driving down a winding road at
night without headlights. Nothing good will come of it.
As chair of this working group, my hope is that we may
provide the needed direction, guidance, and support for all
States that are traveling on this road together so that we as
regulators can help our States make informed decisions and
minimize disruptions to insurance consumers and our markets. We
sincerely appreciate the efforts of Congress in aiding us at
this critical juncture.
The road to exchange implementation is also a toll road. No
matter what exit a State takes, it will cost something.
However, without answers to our questions, the total costs are
unknown, but seemingly grow every day.
States are also being asked to make a selection of
essential health benefits benchmark plan by the end of this
month, but no rule, proposed or final, has been released
outlining the details of this process. Will a State's selection
really be the selection, or can HHS modify a State's choice or,
worse yet, override the selection and replace it with another
benchmark? At this point no State can answer those questions
because there is no regulation. All we know is that the ACA
clearly intended for the decision on essential health benefits
to be made by the Secretary of Health and Human Services, so at
this point any inference that States have binding
decisionmaking authority on issues appears to be an illusion.
HHS has been similarly silent on how it intends to pay for
a State exchange or what costs States should expect to incur
whether entering into a partnership or merely interfacing with
a Federal exchange. States are required to live within their
fiscal means, which requires thoughtful budget planning.
Without answers to these questions, it is impossible for States
like Pennsylvania to adequately prepare. These questions are
just a few of the many outstanding issues to which States like
Pennsylvania need answers if we are to make informed decisions.
In the end, the unfortunate but consistent delay of
information from HHS will hurt Pennsylvania individuals and
businesses the most. They are the passengers on this journey
that is supposed to bring them to a destination of affordable
and accessible health care. A poorly implemented Federal
exchange, however, will put those passengers at risk. Two years
after the ACA's implementation, we see health care premiums in
Pennsylvania continue to rise, with no promise of reductions in
sight, and we see an increase in the bureaucracy surrounding
health insurance regulation. As I told Secretary Sebelius in my
letter, Pennsylvania's focus remains on getting health care
reform done right, not just done quickly, and certainly not
done in a manner that puts Pennsylvanians at risk.
Even though the lack of information from Washington is
producing roadblocks to effective exchange implementation in
many States, it will not stop Pennsylvania from continuing its
own work towards achieving meaningful and sustainable health
care solutions in our State.
Thank you very much for the opportunity to testify before
you today.
Mr. JOHNSON. Thank you.
[The prepared statement of Mr. Consedine follows:]
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Mr. JOHNSON. Did you get an answer from the Secretary?
Mr. CONSEDINE. We did not.
Mr. JOHNSON. Thank you.
Mr. Trautwein, you are now recognized for 5 minutes, sir.
STATEMENT OF E. NEIL TRAUTWEIN, VICE PRESIDENT, EMPLOYEE
BENEFITS POLICY COUNSEL, NATIONAL RETAIL FEDERATION,
WASHINGTON, D.C.
Mr. TRAUTWEIN. Thank you, Mr. Chairman, Ranking Member
Stark, and Members of the Committee. I appreciate the
opportunity to appear before you today.
My name is Neil Trautwein, and I am a vice president and
employee benefits policy counsel with the National Retail
Federation. I am pleased to appear here today on behalf of the
NRF, which is the worldwide voice of retail in all channels and
all forms of distribution.
Retail supports one out of every four jobs in the economy
today and contributes $2.5 trillion to the gross national
product. We support effective implementation of the Affordable
Care Act, even though we don't support the underlying law. We
are concerned, as people who have to live with the law, by the
delays in issuing regulations and agency reliance on temporary
guidance rather than formal regulations, but we do recognize
that the agencies are balancing a lot of different concerns,
and probably we wouldn't have been happy had they issued
interim final regulations in the first place.
Still, we cannot afford to have the ACA stumble out of the
starting gate, because it is our employees and individuals out
there who will bear the brunt of the problems, particularly as
regards health insurance exchanges, which is very important to
employers and employees alike.
The fate of exchanges will be a significant indicator for
the ultimate success or failure of the Affordable Care Act.
Unanswered questions abound on exchanges despite a final
exchange rule. The lack of additional guidance on questions we
and others have asked has not only slowed exchange planning in
many of the States, but also employer planning for benefits in
years 2014 and beyond. NRF and other members of the Coalition
on Choice and Competition have worked hard to encourage both
the States and implementing agencies to move forward, but the
clock is ticking, and fall 2013 is very short away. We
particularly fear that as the regulations are released late in
the ballgame, a cascade of regulations will telescope onto
employers and really frustrate them as they are trying to
manage new responsibilities.
To employers, genuine reform would lower the cost of
coverage and make it easier to provide coverage. The ACA is
nothing if not complicated, something that advocates and
opponents both agree. We do credit the regulatory agencies for
working hard and fairly cooperatively to implement the ACA,
which has not been the easiest task in the world.
The administration has been appropriately solicitous of the
retail industry, partly because of our place in the economy,
also because of the difficulty of covering the retail and
restaurant workforce. Much of the regulatory guidance released
to date will help accommodate our workforce concerns, but we
really would prefer not to have to revisit these issues on a
year-by-year-by-year basis.
Much of the administration's guidance lacks the notice-and-
comment finality employers must rely upon to plan for the
future. The consistent attention and cooperation of the
administration, though it has been both welcome and helpful,
doesn't make up for that finality.
Timing is becoming critical for benefits that are to be
available in January 2014. My members tell us that they
commonly need 6 to 9 months to prepare for each year for
coverage in an ordinary benefit year. 2014 will be anything but
normal. It will be a lot of new issues and responsibilities to
take on. Without final regulations in the first quarter of
2013, I fear that we will have a lot of attrition in the level
of employer-sponsored plans.
Again, I appreciate the opportunity to appear before you
today. Fair and final regulations will help individuals,
employers, health plans, and exchanges prepare for the
difficult transition ahead in January 2014. The best chance
health insurance exchanges have to succeed is to launch
smoothly and as glitch-free as possible. NRF stands ready to
work with the administration and Congress to help make the ACA
more workable so long as it remains the law of the land.
Thank you, and I look forward to your questions.
Mr. JOHNSON. Thank you, sir.
[The prepared statement of Mr. Trautwein follows:]
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Mr. JOHNSON. Mr. Blumstein, you are now recognized. Well,
wait a minute. Durham, let me get you first.
STATEMENT OF DANIEL T. DURHAM, EXECUTIVE VICE PRESIDENT, POLICY
AND REGULATORY AFFAIRS, AMERICA'S HEALTH INSURANCE PLANS,
WASHINGTON, D.C.
Mr. DURHAM. Thank you, Mr. Chairman.
Good afternoon. I am Dan Durham, executive vice president
for policy and regulatory affairs at America's Health Insurance
Plans. I appreciate this opportunity to testify on health
insurance exchanges.
AHIP members are strongly committed to competing in the new
marketplace and offering high-quality, affordable coverage to
consumers who shop in exchanges. Since the day the Affordable
Care Act was enacted, our members have been working around the
clock to implement the law, while continuing to meet the needs
of their 200 million customers. Health plans are complying with
the thousands of pages of regulations, data requests, and other
requirements that Federal agencies have issued. In short,
health plans are focused like a laser on implementation, while
continuing to offer high-quality, affordable coverage within
the parameters of the law.
My written testimony focuses on key implementation issues
and recommends five things: minimizing disruptions as we
transition to exchanges, ensuring workable exchange operations
and State flexibility, minimizing coordination to prevent
redundant regulations in data collection, maximizing choice and
competition, and addressing specific ACA provisions to make
healthcare coverage more affordable.
I will begin by emphasizing the urgent need for regulatory
clarity with respect to exchanges. Health plans, States, and
others need clear regulatory guidance on the following: First,
the comprehensive insurance market reforms, including
guaranteed issue, adjusted community rating, and geographic
rating areas. Health plans need clear guidance on how these new
market rules will be applied both inside and outside the
exchange to appropriately develop and price their products.
Second, essential health benefits. While we appreciate the
flexibility provided in the bulletin released last December,
health plans need final guidance on essential health benefit
requirements to develop products that qualify for individual
and small-group coverage. The process for developing new
products is data intensive and time consuming and typically
takes between 12 and 18 months.
Third, cost-sharing reductions. While the bulletin released
last February was very helpful, health plans still need clear
guidance on how to develop additional products on the silver
tier that will meet the cost-sharing reduction requirements.
Fourth, actuarial value. While the bulletin was released
last February, and we know a great deal of work has been
proceeding, we look forward to the release of the actual
calculator that will provide a simplified means for health
plans to compute and report actuarial value for the plans they
intend to offer.
Fifth, risk-mitigation programs. While the final rule was
released earlier this year, and significant work is ongoing,
the specific parameters for reinsurance and the methodology for
risk adjustment have yet to be released. Health plans will need
to know the details.
And, sixth, the certification standards for qualified
health plans, including quality reporting requirements on the
activities that improve health outcomes and patient safety.
Health plans need to know all the requirements necessary to be
certified as a qualified health plan in order to develop their
products appropriately.
Clear regulatory guidance in each of these areas is needed
in the very near future. Unless such guidance is forthcoming,
it will be difficult for health plans to complete product
development, fulfill network adequacy requirements, obtain
necessary State approvals, and ensure that their operations,
materials, training, and customer service teams are fully
prepared for the initial enrollment period that begins on
October 1, 2013.
Our testimony also outlines specific recommendations for
ensuring that exchanges work efficiently and effectively by
minimizing duplication of regulations, data collections, and
exchange functions and adopting common standards for the flow
of data between exchanges and health plans.
And, finally, while the ACA expands coverage to millions of
Americans and provides subsidies, several provisions of the law
will have the unintended consequence of making coverage less
affordable. Our written testimony examines three such
provisions: first, the health insurance premium tax; second,
the minimum coverage requirements; and, third, the age-rating
bands. We strongly urge Congress to revisit these issues to
avoid higher costs and potential coverage disruptions for the
American people.
Thank you again for this opportunity to testify. I look
forward to your questions.
Mr. JOHNSON. Thank you, sir.
[The prepared statement of Mr. Durham follows:]
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Mr. JOHNSON. Professor Blumstein, now you can talk.
STATEMENT OF JAMES F. BLUMSTEIN, UNIVERSITY PROFESSOR OF
CONSTITUTIONAL LAW AND HEALTH LAW AND POLICY, VANDERBILT LAW
SCHOOL, NASHVILLE, TENNESSEE
Mr. BLUMSTEIN. Thank you, Mr. Chairman, Mr. Stark. My name
is James Blumstein. I am a professor at Vanderbilt Law School
and Vanderbilt Medical School. I am pleased to be invited to
appear before the committee. I speak as an individual, however,
not as a representative of Vanderbilt or any other institution.
Briefly, I have been asked to address a very focused and
very specific question: What is the scope of subsidy that is
available on these new exchanges that are going to be created
under the Affordable Care Act? Clearly there are subsidies
available under the statute for State-run exchanges. The
question I want to focus on is whether those same subsidies
exist or can exist under the law for federally run exchanges.
Secondly, the IRS has issued a rule that extends coverage
of the subsidy to federally run exchanges. Is this rule
sustainable?
The subsidies have two roles. They support those who have
incomes at 100 to 400 percent of the Federal poverty level, but
they also serve to trigger an employer tax, a penalty, if an
employer is obligated to provide--a large employer is obligated
to provide coverage that is affordable and meets the Federal
standards. And the question is whether or not the IRS, through
the rule, can impose the subsidy requirement which, in turn,
triggers this tax or penalty upon employers. My brief
conclusion is the following: The Affordable Care Act, or the
ACA, does not provide for a subsidy on the Federal exchanges,
and the IRS exceeds its authority in promulgating this rule.
So let me focus first on the provisions of the Affordable
Care Act. The Affordable Care Act provides two types of
exchanges, a State-run exchange under Section 1311 and a
federally run exchange under Section 1321. Under Federal
constitutional principles, the Federal Government can induce
States to establish exchanges, but they cannot force them or
commandeer them to do that. So inducement is okay, but coercion
is not.
The ACA provides different treatment for these two
exchanges. There is a subsidy expressly provided for State-run
exchanges, and to make clear there is no ambiguity, under
Section 1311, that is the section that provides for State-run
exchanges, there is an important canon of construction in
written documents, contract statutes called, excuse my Latin
here, but expressio unius est exclusio alterius, which means
the expression of one thing is the exclusion of another of the
same kind.
So there are two--very straightforwardly, there are two
types of exchanges under the ACA, State run and federally run.
The subsidy provided for in the ACA provides only a subsidy for
the State-run exchange. So under the exclusio unius principle,
granting subsidy on one exchange and omitting that subsidy on
the Federal exchange means that there is no grant of comparable
subsidy on the Federal exchange, and so if the issue were only
under the statute, it would be pretty straightforward, and it
would be relatively easy to interpret.
What about the IRS rule? The IRS expands the scope of
coverage so that subsidies exist on both the State-run and the
federally run exchange. There is no question that the IRS has
rulemaking power to establish the rules of the road on how
these exchanges will be implemented. The question is whether
they have, narrowly speaking, power to extend the subsidy to
these Federal exchanges and thereby impose a tax on large
employers.
Federal agencies have gap-filling authority when an issue
is either expressly delegated to it, or when, because of
ambiguity, the issue is implicitly delegated that power to fill
a gap. But the agency gap-filling power, because of ambiguity,
must relate to the specific issue the agency addresses in its
rulemaking not globally, but specifically. Here that question
is the scope of the subsidy.
In determining whether ambiguity exists, the courts have
said that you look at traditional tools of statutory
construction, for example, the expressio unius rule, and under
the expressio unius rule, there is no ambiguity on the question
of the scope of subsidy. Only State-run exchanges are qualified
for that subsidy. The ACA provides for subsidy on only one of
the exchanges, the State-run exchanges. It makes reference to
the statutory Section 1311 to make sure that there is no
ambiguity, so it mentions State-run exchanges, and it mentions
Section 1311. Absent ambiguity, the IRS's power to expand the
subsidy vanishes, there is no gap to fill, and thus no power
for the IRS to act as it did.
Thank you, Mr. Chairman.
Mr. JOHNSON. Thank you, sir.
[The prepared statement of Mr. Blumstein follows:]
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Mr. JOHNSON. Ms. Howard, you are recognized.
STATEMENT OF HEATHER HOWARD, DIRECTOR, STATE HEALTH REFORM
ASSISTANCE NETWORK, LECTURER IN PUBLIC AFFAIRS, WOODROW WILSON
SCHOOL OF PUBLIC AND INTERNATIONAL AFFAIRS, PRINCETON
UNIVERSITY, PRINCETON, NEW JERSEY
Ms. HOWARD. Thank you, Chairman Johnson, Ranking Member
Stark, Members of the Committee. My name is Heather Howard, I
direct the State Health Reform Assistance Network, or State
Network. It is a program of the Robert Wood Johnson Foundation
that is helping States implement the coverage provisions of the
Affordable Care Act. The program is housed at Princeton
University's Woodrow Wilson School, where I am a lecturer in
public affairs teaching about health policy, and before coming
to Princeton, I was New Jersey's commissioner of health and
senior services.
My testimony today calls on my experience working with
States on exchange implementation and my previous service as a
State health official. My comments are my own and not on behalf
of Princeton University or the Robert Wood Johnson Foundation.
From my experience I can tell you that while hurdles remain
to be overcome, many States are actively implementing and are
on schedule to stand up health insurance exchanges that will
provide a competitive marketplace for individuals and small
businesses to shop for affordable coverage just over a year
from now.
Today I want to talk about a couple of the themes that we
are seeing in State implementation of health reform. First, we
are seeing that States that want to move ahead with reform are
effectively implementing exchanges. Second, those States that
have not yet made significant progress have a path forward
through the partnership or federally facilitated exchange.
Third, we are seeing that the Federal-State relationship has
been marked by flexibility and collaboration. And, finally, we
are seeing that States are using that flexibility to innovate
and tailor their solutions to meet their State's needs.
Let me start first with what we are seeing in the States
that are successfully getting ready to implement the Affordable
Care Act. We know that 49 States and D.C. have received Federal
planning grants, 35 States received establishment grants to
facilitate additional planning and implementation, 13 States
plus D.C. have already submitted letters to HHS affirming their
intent to establish a State-based exchange, and 15 States
already have exchange structures in place.
Now, that is 13 States and the District of Columbia that
have already signaled their intent to establish a State-based
exchange. We know that other States, though, are working
diligently, but may need to use the partnership model to bridge
the gap to when they can actually stand up a State-based
exchange. This partnership model allows States to retain plan
management and consumer assistance functions. Those are two
areas where States have traditional expertise and regulatory
authority. And we know that still other States have done little
beyond basic research in preparing for an exchange, but many of
them are studying the issues and preserving their options. And
we know that the ACA clearly envisioned that not all States
would stand up a State-based exchange, so the federally
facilitated exchange will provide consumers access to
affordable health insurance products in those States.
Now, we have heard today that the reason for State
inactivity is a lack of guidance from HHS, but if a lack of
guidance were a real barrier to progress, one would expect that
the leading States would be confronting the most barriers and
complaining the most loudly about the need for additional rules
and regulations. In reality, the opposite is true. Those
States, those leading States, are seizing the flexibility
afforded them to pursue innovative approaches, and I believe,
indeed, that the primary factor contributing to this variation
in State activity is the political climate in the States.
Now, we are also seeing that Federal officials are taking a
flexible and collaborative approach to ACA implementation. In
my experience they have provided enough guidance,
responsiveness, and flexibility to enable the States to be
successful. Indeed, we are seeing time and again that they have
come down on the side of State flexibility, and something that
as a former State official I know and appreciate. The best
example of this is the guidance establishing the exchange
blueprint which CCIIO has offered to the States. It is a step-
by-step outline of what States will need to accomplish in order
to comply with the ACA. HHS has set up a series of
collaborative meetings, what they call establishment reviews,
to go over State progress and address State concerns.
Another example that is in my testimony that I can refer
you to of this State flexibility is the essential health
benefit process, where CCIIO has indicated that States can
choose their own benchmark based on plans in their own States.
Now, are more formal rules on EHB and other difficult
topics still needed? Absolutely. But do implementation efforts
need to come to a halt in the absence of formal rules on every
open issue? State Network States and other States across the
country are proving that is not the case.
Now, finally, we are seeing that States are using the ACA
resources to address long-standing problems and persistent
needs. While ACA implementation has presented an enormous
challenge to States, we know they are dealing with, of course,
budget constraints, staffing constraints, but at the same time,
I have talked to many State officials who are seizing the
historic opportunity to expand health insurance coverage and
are tailoring their implementation efforts to meet their
State's unique needs, and I offer many examples of this in my
written testimony.
So in conclusion, the range of tasks that lie before States
and the Federal Government are both daunting and exciting in
scope. Nevertheless, States that haven't made substantial
progress have a path forward under the partnership or federally
facilitated exchange models, and States that want to implement
reform have and will continue to make great strides in
developing and implementing exchanges.
Thank you.
Mr. JOHNSON. Thank you, ma'am.
[The prepared statement of Ms. Howard follows:]
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Mr. JOHNSON. Commissioner Consedine, you know, you said you
had never gotten a response out of the Secretary.
Mr. CONSEDINE. That is correct, Mr. Chairman.
Mr. JOHNSON. And our concern is that HHS has been slow to
provide States with the necessary information on a number of
key issues. In reviewing your letter, your requests seem very
reasonable, like asking for a detailed timeline on when the
hundred future or forthcoming exchange-related regulations
cited by HHS will be released, and if HHS will be issuing final
regulations to their numerous interim final rules, when HHS
will release its rule governing federally facilitated
exchanges, and when will they release a mandated benefit
package rule, and you have never received an answer; is that
true?
Mr. CONSEDINE. Not today, Mr. Chairman, no.
Mr. JOHNSON. And you asked all those questions?
Mr. CONSEDINE. We did, indeed.
Mr. JOHNSON. Well, let me get this straight. States are
supposed to make decisions on benefit packages in the exchange
by the end of the month; is that true?
Mr. CONSEDINE. That is generally true at this point.
Mr. JOHNSON. Yet HHS hasn't released so much as a proposed
regulation outlining the details of this process.
Mr. CONSEDINE. We have guidance at this point.
Mr. JOHNSON. What kind of guidance? Detailed?
Mr. CONSEDINE. It is detailed in some ways, lacking in
others.
Mr. JOHNSON. And States are supposed to let HHS know by
November 16th--that is not that far off--whether or not they
intend to create their own exchange despite the fact that there
are nearly 100 forthcoming exchange-related regulations, and
HHS has yet to propose regulations on what a federally
facilitated exchange might look like; is that correct?
Mr. CONSEDINE. That is correct.
Mr. JOHNSON. It is baffling that the Obama administration
can expect State governments to make informed decisions, ones
that could require tens of millions of dollars in additional
cost in the face of such regulatory uncertainty. Perhaps I
shouldn't be surprised, however. By withholding information
critical from stakeholders, stakeholders are paralyzed, and the
Obama administration holds all the power. By keeping
information from States, employers and health plans, the
Federal Government's takeover of our health care system will be
complete. As a defender of states' rights, that frightens me.
I thank you for your testimony, all of you, and, Mr. Stark,
I recognize you for 5 minutes.
Mr. STARK. Thank you, Mr. Chairman.
Thank the witnesses for enlightening us today.
I am concerned, Mr. Consedine, that you are having trouble
getting in touch. You wrote to Secretary Sebelius in August,
the end of August, with a bunch of questions regarding
exchanges, and have you had any meetings with them?
Mr. CONSEDINE. Not since we sent the letter,
Representative.
Mr. STARK. Have you asked for any meetings?
Mr. CONSEDINE. We have fairly regular discussions with
the--with HHS, but not in response to our questions, no. We
have not asked for a meeting at this point.
Mr. STARK. I see. Well, if you contact Mr. Dioguardi, the
Health and Human Services External Affairs, he will set up a
meeting. If you didn't have to catch a 4 o'clock train, I would
set up the meeting for you this afternoon, and I am sure that
they could help you far better than any of us could, and, you
know, they would welcome the chance. So I hope that you will
take advantage of that and sometimes not wait for a letter. I
mean, wait for a call back we learn in this business is to wait
a long time. Make the second call, will you, and see if they
can't help you. I think they would cooperate with you and get
you all the information you need. It may not make it any
easier, don't misunderstand me, but I think that they could
probably answer a lot of questions for you.
I am concerned. All of you, I can recall some time ago, had
to implement supplemental insurance rules, right? Your State
has? Mr. Trautwein? Mr. Durham? Ms. Howard? I mean, and there
was some grumping and complaining by the insurance companies
and others, but now it seems to work pretty well. Seniors like
it. They can all look at the same policies, different in each
State, but they get a selection of, what, 10 or 11 policies
varying from very limited benefits to generous benefits, and
the prices are all there, and it is wonderful for the
consumers. And I shouldn't think that the insurance companies,
then, it would seem to me, and their brokers or salespeople are
selling the same benefits at different prices, and they have to
pitch the fact that they can provide good service. And that
is--you know, it is hard to spell out what is good service, but
people can check with references, or if it is a company, people
dealing with group policies can find out from their other
companies how well Aetna does against Blue Cross.
And I think that it serves us so well and serves your
constituents or States so well to have some kind of a
determined outline so that people--so that we make it easier--
not easy, but easier--to compare. Most of us are not experts in
insurance, as you all are, and you are dealing with people who
get the broad idea, but if they can see a list, and that is
really what I think we are talking about, I think you do a real
service to your constituents.
I would say that it is too bad we don't have anybody from
California. But we are going to be ready on time, the Governor,
our great Republican Governor, is ready to roll up his sleeves.
He signed the implementing legislation in September, and I
would hope that other States' Governors would move ahead.
Sometimes we just have to dig in and say, this is a pain in
the butt, like a new tax regulation or a new whatever. You have
got to go ahead and do it, and I don't mean to say that we just
put those things in law to make trouble for you, but we try and
put them in law, so that we have to write laws here for every
State in the Union. We can't write one law for California and
one--and so thank you for putting up with us, and please call
on our staff. I know the Republican staff is willing to help
and see if we can't cooperate and get this done for all of our
constituents, because in the end to bring in millions of
additional people is going to save us all money. It is going to
save the taxpayers money. It is going to lower in time the cost
of medical care.
The worst thing we could have is somebody without medical
insurance or a way to pay for medical care ending up in the
emergency room. That costs all of us; you, it raises our
insurance premiums, it raises our taxes. And that is one thing
I think we can all agree, we have to see that everybody gets
covered one way or another. You may not like my universal
health care plan, but let us work toward it.
Thank you very much, Mr. Chairman. Thank the witnesses
again.
Mr. JOHNSON. Did the Governor of California change parties?
Mr. STARK. No, he hasn't. Now, we have talked to him about
that.
Mr. JOHNSON. Well, you called him a Republican Governor.
Mr. STARK. But then his wife would become a Republican, and
then we would have real trouble.
Mr. JOHNSON. Well, you called him a Republican.
Mr. STARK. Well, he is.
Mr. JOHNSON. Really?
Mr. STARK. Arnold?
Mr. JOHNSON. Arnold? Arnold's not Governor anymore, I don't
think.
Mr. STARK. Well, no, but he signed it. It was Governor
Schwarzenegger, I am sorry, not Governor Brown.
Mr. JOHNSON. Okay. Mr. Nunes, you are recognized.
Mr. NUNES. Thank you, Mr. Chairman.
I just want to state for the record that in my district
from California, with Medicaid and Medicare going broke and the
State of California in dire need of financial and budget
reform, they actually can't even pay the bills now. Governor
Brown, who is a Democrat, is going to the people to raise
taxes, and they are not even sure if those taxes will pay for
the current requirements under Medicaid, what is known as
MediCal in California.
Ms. Howard, in your testimony that Federal officials have
been responsive, I think you used the words ``flexible'' and
``collaborative,'' I am troubled to understand how it is
collaborative or responsive when bulletins and guidelines are
being substituted for the normal procedures which involve
drafting clear rules allowing for public comment and then
setting formal policy.
Ms. HOWARD. Well, actually it is more collaborative the way
they have been doing it because it allows them to meet with
stakeholders. And I think we heard from some of the
stakeholders here that they had been involved in that process,
and that they are able to inform the formal policymaking role;
that in the first year of ACA implementation, they issued a
number of interim final rules, and there was an outcry from the
regulated community that, you know, we want to be more
collaborative.
And so now they have taken the less formal approach, and
they have been meeting with stakeholders, and I have certainly
seen that. I saw the commissioner at the National Association
of Insurance Commissioners meeting in August, and there were a
number of Federal officials there holding office hours, meeting
with State officials.
So I think this process and EHB, the central health
benefits, is another example of where the Federal Government
has been flexible. They received input from an expert panel at
IOM, they met with stakeholders, they developed initial
guidance. Then they met with stakeholders again, they issued
frequently asked questions, and in the end they came down on
giving States flexibility and said to States, you can choose a
plan that operates in your State; we are not going to come up
with a one-size-fits-all Federal approach.
So I think we really are seeing the Federal Government be
as flexible as they can. And as a former State official, I know
you want clarity from the Federal Government, but that is not
always the best thing, because what we are seeing is States are
seizing that flexibility to come up with solutions that work
for themselves.
Mr. NUNES. Well, that sounds nice, but in reality here we
passed legislation. I didn't vote for it; many of us up here
didn't vote for it. But at the end of the day, there has to be
clarity for folks like the insurance commissioner to implement
law in his or her own State.
So, Commissioner, how are you finding the flexibility?
Mr. CONSEDINE. Representative, we hear the words
``flexibility,'' ``collaboration'' a lot. You know, what we
often get, however, is we will be collaborative and flexible
within a fixed sort of parameter of a mindset within HHS, but
outside of that you quickly run into resistance.
You know, we have a very good working relationship with
HHS, a number of those folks are former insurance regulators,
and I have nothing but admiration for the job they are trying
to do, but what we often get--well, you know, what we are
really after at this point is the guidance and the clarity that
you talk about. And they are not, you know, in-the-weeds
questions at this point. We are asking very general, broad
questions like how much is this going to cost us? What level of
autonomy are we really going to have? How is this going to
work? And it is, we will get back to you soon.
Mr. NUNES. Well, it sounds like the flexibility you are
going to need is you are going to have to have friends on the
Ways and Means Committee to get you appointments with the folks
over at HHS who you can't get a response from.
I just want to be kind of general here just to get a
general flavor for all of you on the panel, just on a scale of
1 to 10, just to kind of give the general public your view of
whether or not how successful this is going to be by 2014 in
terms of its implementation. So 1 being it is going to be
great, not going to be any problems, to 10 being it is going to
be a complete train wreck, and we have got a lot of problems
before 2014. Why don't we start with you, Mr. Commissioner.
Mr. CONSEDINE. Thank you for putting me on the spot.
Mr. NUNES. We can start on the other end if you like.
Mr. CONSEDINE. I would give it an 8. I mean, we have very
grave concerns at this point that people, if they don't have
good information, they are going to make bad choices, and when
you are making bad choices when it comes to health insurance,
that has very significant repercussions.
Mr. NUNES. Mr. Trautwein?
Mr. TRAUTWEIN. I worry that we are in that 7 to 8 range
myself. I represent employers who are going to have to deal
with the compliance issues and understand how to navigate
through their responsibilities. I spent a lot of time trying to
educate my members about how the law will come into effect and
what their responsibilities will be. There is a lot of
confusion out there.
Mr. NUNES. Thank you.
Mr. Durham. I am out of time here. The chairman's being
very gracious.
Mr. DURHAM. It depends. The sooner we get clear regulatory
guidance, the closer we can get to 10 on the scale.
Mr. NUNES. You mean to 1 or 10?
Mr. DURHAM. It depends on----
Mr. NUNES. It depends on the guidance.
Mr. DURHAM. The sooner the better.
Mr. NUNES. Mr. Blumstein?
Mr. BLUMSTEIN. Yeah. I don't know that I can give you a
number. Of course, I am from Tennessee where we implemented our
TennCare program in about 60 days, so our folks are pretty good
in navigating that process.
I would have to say that it would be nice to get more
clarity and have a rule of law. When you talk about
negotiation, it is really not a rule of law, and that is the
problem that I have with that process.
Mr. NUNES. Great words.
Ms. Howard.
Ms. HOWARD. And like the professor here, I am a lawyer, not
a math person, so I will just say that I think the building
blocks are in place. The Federal Government has experience with
Part D, with HIPAA, with the early implementation of the under
26 and the preexisting exclusion for kids, a lot of experience
under its belt, and I am hopeful it will be close to that end
of the spectrum.
Mr. NUNES. So 3 heading to 1?
Ms. HOWARD. You know, I am hopeful it will get there.
Millions of people are hoping for it.
Mr. NUNES. Thank you.
Thank you, Mr. Chairman.
Mr. JOHNSON. The gentleman's time has expired.
Mr. Kind, you are recognized.
Mr. KIND. Thank you very much, Mr. Chairman.
I want to thank the panelists for your testimony here
today.
Ms. Howard, let me start with you. Perhaps I missed the
memo that went out somewhere that said this was going to be
easy, that this was going to be seamless, that this was going
to be perfect right out of the block. I think we all know,
those of us who have been dealing with healthcare reform, how
complicated and how difficult this is going to be to try to
increase the access of healthcare coverage in our country,
improve the quality of care, and bend that cost curve.
This is probably the paramount issue that we are facing
with as a Nation today. We are not going to get our fiscal
house in order unless a lot of these reforms succeed, and being
able to bring healthcare costs while expanding coverage and
improving quality. I mean, it is as simple as that. And yet I
hear a lot of people complaining that things aren't happening
immediately and perfectly right out of the block.
Mr. Consedine, I appreciate your testimony, but I think you
are here and you are a little more sophisticated than you are
leading us to believe in the political world. You don't send a
letter to a Department like HHS and expect an immediate
response within 2 weeks and then rush down to Washington
complaining about lack of responsiveness. I will guarantee you,
you pick up the phone, you call and you set up a meeting down
there, they will be more than happy to sit down with you and go
through this chapter and verse. And you are not going to need
any leverage on this committee or any other Member of Congress
to help grease the skids to get an appointment with HHS.
Ms. Howard, I am hearing from you that with the
collaboration that you are working with the States, willing to
go forward on the exchange, that there has been some open
communication, and yet we heard testimony today there is a lack
of communication, there is a lack of direction, there is need
for clear guidance. Is this what you have been experiencing in
working with the 10 States that are trying to implement the
exchanges right now?
Ms. HOWARD. I will start by saying I think you are right;
if it were easy, we would have done it already, and it would
have been done generations ago. And we have some good early
news today with the census numbers. I am seeing a drop in the
uninsured rates. There is a lot of work to be done.
What we are seeing in our States is that the States that
want to move are able to move. And, in fact, they are seeing
this flexibility as an opportunity. So I will take, for
example--I am sorry that Congressman Blumenauer is not here
right now, but Oregon is seizing the flexibility under the EHB
rules. They have recommended the third most popular small-group
plan in their State to be their central health benefits
benchmark. So if there had been something from on high from the
Federal Government saying, this is what the benefits package
will look like, Oregon wouldn't be able to do the analysis and
see what works for Oregon.
So certainly time and again we are seeing States are
seizing this opportunity and are really able to do it in a way
that works for them, and that is that Federalism that I think
we want to see, that collaboration between the Federal
Government and the States.
Mr. KIND. Well, we just heard previously from Mr.
Trautwein, and I appreciate his testimony, that by the first
quarter of next year, we are going to need some clear
direction, we are going to need clear rules at that point. Do
you agree with that assessment?
Ms. HOWARD. I agree. I agree, absolutely. I think the
Federal Government has been prioritizing what they have done.
They have done a number of final rules this year, they did the
exchange final rules. They actually did the final rules on risk
adjustment, which was really important, very complicated, and
that is something they tackled early knowing that it was so
complicated. So I think you are seeing a sequencing, and I
think we will see more as soon as they are able.
Mr. KIND. I thank you, and with all due respect to the
chairman of this committee, this hearing may be a little
premature in that regard, but as far as I am concerned, I am of
the attitude the more oversight, the more hearings, the more
feedback we can get, the better off I think everyone is going
to be. So I don't have a complaint having a hearing like this
today, but let us also be realistic in regards to the timetable
involved.
I guess what is frustrating for me is, you know, the whole
creation of the exchanges in the Affordable Care Act was based
on legislation that I and others had introduced for years
around here, called the SHOP Act, and every time I introduced
that bill, I had an equal number of Republicans and Democrats
supporting it, because, I mean, what is conceptually not to
like? It is giving consumers choice to be able to go to a
health insurance exchange and be able to choose their own plan
amongst competing private health insurance plans through the
power of the competition in the marketplace that is going to
help drive prices down and hopefully improve the quality of
care, and then we couple it with tax credits to make it
affordable for those who can't do it on their own, for low-
income families. That is really the whole concept behind the
exchanges.
By the way, I mean, if States want to join together and
form a larger exchange across borders, they are allowed to do
that, too, under the Affordable Care Act. There is no
restriction for States to be able to partner and create even
larger exchanges. If all 50 States want to eventually create 1
national exchange, there is nothing stopping them or
prohibiting them from doing it.
But I sense from your testimony, Ms. Howard, that your
opinion is that there is a difference in attitude and therefore
approach from those States willing to make their best effort
and go forward in the implementation of the exchange and those
that for whatever political reason are choosing not to. Is that
a reasonable assumption?
Ms. HOWARD. I think that is correct. I think that variation
in State approaches is due in large part to the political
climate in the States, and the States that do want to move and
are trying to seek or trying to implement are finding ways to
do so.
Mr. KIND. Well, I think this is a response to the 54
million uninsured and the fact that the small-group market has
failed miserably for so many individuals, small businesses and
family farmers, and if anyone has a better idea of how we can
extend healthcare coverage on an affordable basis to more
Americans, we are all ears. I mean, this is not all set in
stone, and we are willing to make adjustments as we go along,
too.
Thank you for your testimony. I yield back.
Mr. JOHNSON. Drink more milk.
Mr. Reichert, you are recognized.
Mr. REICHART. Thank you, Mr. Chairman.
I want to quickly follow up, Mr. Blumstein, with some
questioning as far as how you communicate with the government.
I was a sheriff for a long time and had the opportunity to work
closely with some of the Federal law enforcement agencies and
know that sometimes communication by phone is an expedient way
of getting things done, but sometimes you need things in
writing.
And I was just listening to your earlier testimony and your
description of the two exchanges that exist, the Federal and
the State, but we have information here, too, that lists some
other--maybe these are subexchanges under the two main
exchanges--American Health Benefit Exchange, the sub--the Small
Business Health Options Program, the regional, or other
interstate exchanges, the subsidiary exchanges, exchanges
operated by HHS Secretary. And then there is a partnership
exchange listed, and under that title it says, via rulemaking
HHS has created and modified federally controlled
partnerships--in quotes, ``exchanges''--which are not defined
or contemplated anywhere in the law.
So when we go to the question of how we communicate with
the government, what would you rather see, something in
writing, you send a letter, you get something back in writing
so you would know that the government has answered the question
in a way that you can respond to; or does a phone call,
personal meeting--what is your opinion on that?
Mr. BLUMSTEIN. Well, I think that the relationships between
citizens and their government should, when possible, be based
upon rules. And we live in a rule-of-law society, and I think
it is important to specify those rules; otherwise one lives in
a world of governmental discretion. And governmental discretion
can be exercised in ways that are appropriate, and it can be
exercised in ways that are questionable, and it can be
exercised in ways that are questionable and inappropriate. And
so I tend to err on the side of having clearly delineated
structures and rules and guidelines and to develop a process
with some degree of transparency so that the accountability
concern that citizens have is really adhered to.
I have been in many negotiations, and, you know, what is
negotiated can work for one situation and not for another. That
sounds flexible. But it also runs the risk of bias, cronyism,
using leverage in an inappropriate way. So I think that the
way, the better way, to communicate is through formality. Now,
that doesn't mean that there is not a role. I think that Mr.
Stark's proposal to get together is not a bad proposal. I think
that is a reasonable proposal. But at some point at the end of
the day, the proposal has to be written down, and it has to be
neutrally administered so that the particular government
official is going to be--is going to say what the deal is, what
the structure is, and you don't always have to go to the
government, please, Daddy or Mommy, can I do something at a
certain time? There have to be claims of right, and that is
what the rule of law is about.
Mr. REICHART. If you have a piece of paper to look at, we
all know what the rules are. So it bothers me that this last
partnership exchange is not mentioned anywhere in the law or in
any rules, but it is still a part of the plan that maybe some
of you may or may not know about as yet.
I want to focus on the cost real quick in referencing our
State of Washington in particular with the commissioner and Mr.
Trautwein. The healthcare law requires exchanges to be self-
sustaining by 2015, as you well know, and this means that the
Federal Government cannot support ongoing exchange operations
and administrative costs. Washington State's own exchange
consultants have estimated that in 2015 the cost of operating
the exchange will range from 40- to $60 million per year. So
this runs between 11 and $22 per member per month, runs about
500 to $1,000-plus for a family of four per year. And this is
on top of the premium for health insurance and just to pay for
the administrative costs of operating the exchange. That is the
cost. So many of the functions of the healthcare exchange are
already provided in the private sector; for example, verifying
eligibility, billing, those examples.
Why is it costing taxpayers in the State of Washington from
500 to over $1,000 per family per year to receive subsidies
through this structure?
Mr. CONSEDINE. Congressman, I really don't have much in the
way of insight as to Washington State's costs. In our
experience looking at various exchange options in Pennsylvania,
cost is really dependent on the design of the exchange you go
with. Some States are looking--were looking and are looking at
designs where the State's involvement is minimal, and,
therefore, costs are less. Some are looking at a very engaged
State exchange with additional levels of bureaucracy,
employees, and of course that adds to the tab.
Certainly from our perspective, coming from a State that
does have its fiscal challenges, being cognizant of the cost is
a significant part of the analysis process we are going
through, because at the end of the day, those costs will be
borne by the taxpayer directly or indirectly. And again, this
is coming at a time when healthcare costs, even with the
passage of the Affordable Care Act, continue to go up. So to
add to that further by adding additional costs caused by
potentially moving forward with the State exchange is, again,
part of the dynamic that we are all looking at in weighing our
options at this point.
Mr. REICHART. I see my time has expired, Mr. Chairman.
Thank you.
Mr. JOHNSON. Thank you.
Mr. Pascrell, you are recognized.
Mr. PASCRELL. Mr. Chairman, the exchange grants program has
awarded over $1.6 billion to States and territories in pursuit
of this effort to implement the legislation. My home State of
New Jersey--and I am glad we have a Jersey girl on the panel--
my State of New Jersey has already received 8.6 million in
grants for research, planning, information technology
development to get the exchange off the ground; yet there is
some political involvement there, which continues to get in the
way. And it seems that certain Governors and certain
legislatures would rather reject input into something
critically important for their own constituents just to make a
point.
Now, I am convinced after listening to the distinguished
panel, each and every one of you did a really fantastic job,
that, number one, we are here discussing the bill and the act
right now and the particular exchanges that are going to come
about in 2014 because the past system or the system that we
have now didn't work. There is a lack of competition, and you
have said it in different ways. There are some States where you
had only three or four companies writing policies, and that is
controlled by the individual insurance director or commissioner
of that particular State.
So it wasn't easy just to talk about; there is no easy
answer to why don't we just have people out to cross the State
lines and go into Nova Scotia, which is not a State, and buy
insurance? It wasn't that easy.
How much competition do we have in most States? Very
little. Is this what capitalism advocates? No. Don't we
essentially desire to increase competition? Yes. Is the
objective of the exchange system to increase options in
competition; is that what its purpose is? And do we have really
an enlargement of a Federal system, whatever that is? The
answer to the first question is yes, yes and yes. And the
answer to the last question is no.
How this is an enlargement of the Federal system--and
remember, in the beginning it was called socialism; now we have
gotten off that term, and we are using other terms now. How,
when we want to increase competition, when people are going
into the private market into these exchanges regardless of how
they are established in each State, does that reduce private
entrepreneurship? That is a good question, I think. I have
never heard a good answer to it.
Now, Mr. Blumstein said that--rightfully so--that there are
only subsidies for those State-run exchanges. I think that is
what you said, Mr. Blumstein, correct? If you read the
legislation, I think it is pretty clear. So you omit subsidies,
subsidies are omitted for Federal exchanges; in other words,
for Federal Government exchanges. I would like to know Ms.
Howard, Director Howard, what do you think about that?
Ms. HOWARD. So we have--what is also clear is we have very
clear guidance from the IRS on this issue. And the IRS actually
testified yesterday before another subcommittee of this
committee on this issue, and we have career attorneys at the
Department of Treasury that have been looking at this and have
come down, in all due respect to my colleague here, on the
other side. And certainly what I am seeing across the country--
--
Mr. PASCRELL. What is ``the other side''?
Ms. HOWARD. The other side is that the exchanges--that
regardless of the type of exchange, consumers should have
access to subsidies.
Mr. PASCRELL. That isn't what he said.
Ms. HOWARD. Right.
Mr. PASCRELL. Oh, okay.
Let me ask you this question: In your testimony you
identified several different forms, State exchanges. The forms
they have taken are very different. It seems that a rigid
approach would not be the most effective. I think we all agree
with that.
Can you discuss some of those different approaches that
States are taking and address some of the unique State-level
insurance market issues that might be beneficial to one State
and not another?
Ms. HOWARD. Thank you. That is a great question, and I will
tie it back to your earlier point, which is that we do see
variation across the country. In some States they have one
insurer may have 85 percent of the market, so you have
incredible competition--you have incredible concentration.
Mr. PASCRELL. You wouldn't call that competition, would
you? Would anybody on the panel call that competition. When one
firm--when one company is writing 75 percent of the policies in
that State, is that competition?
Mr. DURHAM. I would just like to add here that you can go
to healthcare.gov in any State, in any ZIP code, and you can
see all the plans that are available now in the individual and
small-group market. The plans have made an awful lot of effort
to load those systems with what they have to offer in those
States. So there is a lot of choice.
Mr. PASCRELL. Well, things have changed in the last few
years. It is interesting that when we debated the bill, it
precipitated many changes in many plans and many offerings. So
already I think before we get to the exchanges we have
healthcare reform to some degree. But I interrupted you.
Mr. JOHNSON. One more.
Ms. HOWARD. Congressman, you are right. There are different
exchanges options available to the States. There is the State-
based exchange in which the State runs all the functions of the
exchange. At the other end of spectrum is the federally
facilitated exchange with the Federal fallback. But there is
this new model called the partnership model, which would allow
the State to take on some of the functions of the exchange, and
that model is attractive to some States that might not yet be
ready to run their own exchange, might want to do only parts of
it, and it really allows a State to maximize the areas in which
they have expertise.
A State like New Jersey that has a robust regulatory
scheme, the Department of Banking and Insurance has a lot of
expertise there, they might want to maintain plan management,
or they might choose to maintain control over their insurance
market rather than having the Federal Government come in and do
it. So that is that partnership model, which is really a
flexibility for the States.
Mr. PASCRELL. Mr. Chairman, in conclusion, if I may, if--we
heard complaints about certain States having a problem getting
to the goal line. One-third of the population of this country
right now is living--are living in States that have a darn good
exchange plan moving, one-third of the population already.
Mr. JOHNSON. Okay.
Mr. PASCRELL. Thank you.
Mr. JOHNSON. The gentleman's time has expired.
Mr. Gerlach, you are recognized.
Mr. GERLACH. Thanks, Mr. Chairman.
Commissioner Consedine, you have had a couple of questions
from some of our Members of the Committee today about your
August 23rd letter to Secretary Sebelius and whether
realistically you have given her enough time to respond to your
questions. But I understand also you might have had prior
meeting with HHS on a number of issues that you still continue
to question. Is that accurate? And if so, what was the outcome
of that meeting or meetings?
Mr. CONSEDINE. I appreciate the question, Representative,
and the opportunity to clarify.
The questions that we have in the letter are questions that
we have been asking for months now as part of our meetings with
CCIIO and HHS that we do have. And they are very accommodating
in meeting with us and sitting down with us, but what we
haven't gotten to date are answers, and guidance and the
clarity that we need on these questions. So really the letter
is the formalization of the process that we have been going
through for months now.
And, you know, we are nearing the end of sort of the
timeline we have been given. We have until November 16th really
to make a decision as to when--what the States are willing to
do. So we need these answers.
Mr. GERLACH. Okay. Also understand there is a July 23rd
letter to Kathleen Sebelius from the Republican Governors
Policy Committee asking a whole slew of questions very similar
to the questions you have raised in your August 23rd letter.
And since Governor Corbett of Pennsylvania is a member of the
Governors association, do you know whether or not he has
received any responses to that letter or to the questions
raised in that letter?
Mr. CONSEDINE. To my knowledge, there was a response to the
letter, but not answers to the questions that were raised.
Mr. GERLACH. Ms. Howard, you indicate, I think, on two
occasions that really the lack of progress in moving forward
with State exchanges is really connected to the political
climate in a State and not maybe other things. Are you
suggesting that the questions posed by Commissioner Consedine
or the Republican Governors Policy Committee, those questions
really aren't valid or fundamental as to whether a State ought
to move forward in establishing a commission--excuse me, an
exchange?
Ms. HOWARD. No, not at all. I think there are important
questions to be raised, and this is a deliberative process. And
I think they are in constant dialogue, as we have heard
actually, with CCIIO, and I think it is constructive to be
asking these questions.
I just make the larger point that while some States may be
in a holding pattern now because of external forces, external
factors, the--you know, some States, the States that really do
want to move, are able to move absent the guidance that they
are asking for.
Mr. GERLACH. As somebody that has been in the State
legislature in Pennsylvania, before I would be asked to put up
a vote on whether or not to move forward with something that
commits taxpayer dollars at the State level, I would want to
have answers to the questions of how much it is going to cost
the taxpayers of Pennsylvania to have this exchange. Based on
your work with the foundation, do you know how much it is going
to cost taxpayers in Pennsylvania to have an exchange in the
Commonwealth?
Ms. HOWARD. No, I don't think we know that yet, because it
is an evolving--we don't even know what policy decisions and
what type of exchange Pennsylvania would choose to have.
Mr. GERLACH. Here is a question from one of those posed to
the Secretary: What financial costs will the State face if it
elects to default on a federally facilitated exchange? Do you
have an answer to that question?
Ms. HOWARD. No. That is the issue that is pending, the
final federally facilitated exchange rules.
Mr. GERLACH. Another question: If HHS operates an FFE in
the State, will the multiple State insurance plans be required
to adhere to all applicable Pennsylvania insurance laws? Do you
know the answer to that?
Ms. HOWARD. I do not.
Mr. GERLACH. So how can you expect any State to really put
forward a public position on whether to move forward with an
exchange if it doesn't know the impact on costs to the
taxpayers of that State or to the insurance laws of that State?
Isn't it prudent for the State decisionmakers to have those
answers before they make that decision?
Ms. HOWARD. Well, I think they are all proceeding prudently
in the sense that they are all investigating their options and
making policy decisions. And I do think it is admirable that
they put so much effort in. And I know there are a lot of
people working hard in Harrisburg, and in Trenton and in all
these State capitals.
I do go back, and while every ``I'' may not be dotted,
there has been substantial guidance. In fact, we heard, I
think, one Member testify about thousands of pages of guidance.
So I think there is substantial guidance out there.
Mr. GERLACH. But if the right questions aren't being
answered, you still don't have the information as a
decisionmaker in a State to move forward. So just as you
acknowledged that the August 23rd letter from Commissioner
Consedine and the July 23rd letter from the Republican
Governors Policy Committee were appropriate to raise with the
Secretary of HHS, wouldn't it be prudent for her to respond as
soon as possible?
Ms. HOWARD. I think so. I do know, having been a government
official, that sometimes getting letters out is not always
easy. And I do agree that often the phone may be the best way,
and I think that hopefully will be one outcome of today.
Mr. GERLACH. But answers need to be in writing because
there could be litigation down the road, could there not? And
so having formal answers in writing from both sides would be a
very important part of building the record in making sure the
proper decisions are made; would you agree?
Ms. HOWARD. Not always, because, again, sometimes on the
spectrum of Federal options, the Federal Government could be
very prescriptive, and they could handcuff the States. And we
are seeing the States that want to implement are seizing that
flexibility and moving ahead.
Mr. GERLACH. If I were in the State, I think I would want
something in writing before I could rely on it from some
Federal agency. Thank you, I yield back.
Mr. JOHNSON. Good point.
Commissioner, I understand you have got to catch a train,
so I just want to thank you for being here and for answering
our questions so intimately. Thank you again, and you are
excused, if you desire. Thank you.
Mr. CONSEDINE. Thank you, Mr. Chairman.
Mr. JOHNSON. Mr. McDermott. Doctor, you are recognized.
Mr. MCDERMOTT. Thank you, Mr. Chairman.
Mr. Chairman, I disagree with the main point of this
hearing. If the point is that the administration won't be ready
for implementation of the Affordable Care Act, then I am here
to tell you that is wrong.
I come from the State of Washington, which is leading the
way in moving forward with the Affordable Care Act. My office
is in regular contact with all the principal players in
Washington State, and they say that all systems are go. The
legislature has enacted the authorizing legislation necessary
to implement the act. In March of this year, the Governor
signed into law the second and final piece of exchange
legislation.
Washington State is one of the first States to receive a
Level 2 establishment grant funding to build its exchange.
Washington is also one of the first States to select a
benchmark healthcare plan. It is a Blue Shield plan that is
currently the most popular small-group plan in the State of
Washington.
The exchange now has an 11-member board of directors,
including various operating committees. The exchange also has
in place an advisory committee and working groups that focus on
consumer protection and plan management, among other things.
The exchange has a CAO and staff in place. They have hired the
contractors to build the necessary user infrastructure. They
are on track to get conditional certification from the
administration in January and to start using testing in the
spring.
The exchange CEO tells me they are projecting to have
300,000 Washingtonians in the exchange, in the pool, by 2015 in
a State with 1 million people without insurance, which spends
$1 billion annually on uncompensated care. Getting those people
into plans is what I am most focused on, not on picking fights
over perceived faults with the new system. I think if you are
looking for excuses for not implementing, you can find them. If
you want to implement, you can do it, because the State of
Washington is perfect proof that that is going on.
And what I hear from the State about the administration is
really nothing but praise. They have said that HHS is working
with them at every step of the way and giving them all the
guidance and support they need. So if my colleagues on the
other side of the aisle are here to argue that stakeholders
don't have the tools they need to get health reform off the
ground, I am here to tell you I am not buying it.
Mr. Kind is correct, this is a premature hearing, because
you could have had States out here that are actually up and
running. You brought one person who says, I couldn't get them
to write down exactly how I should do it. Well, you can always
find that kind of stuff, but there are other places where it is
in place, working, and Washington State is ready to go.
And I think that I just want to say one last thing before I
stop here, and that is the chairman said in his opening
statement that the administration is implementing the
Affordable Care Act, quote, ``behind closed doors with little
or no public input.'' Now, I would like to submit for the
record, and I ask unanimous consent for that, for a record--a
list of 34 just exchange-related conferences, meetings,
listening sessions and consultations HHS has held since
December 2010. Thirty-four meetings is hardly without public
input.
[The information follows: The Honorable Jim McDermott]
[GRAPHIC] [TIFF OMITTED] 80694.058
[GRAPHIC] [TIFF OMITTED] 80694.059
[GRAPHIC] [TIFF OMITTED] 80694.060
Mr. MCDERMOTT. This is a process that is working in some
States because the political leadership wants it to work, and
is not working in certain places because the political
leadership thinks that this is how they will use it to defeat
President Obama in the election. And there is a very clear
break point. It is possible to implement, it is being done.
And will there be problems? I am certain we are going have
problems in the 2013 session that we are going to be in here
trying to tinker with this and tinker with that and make
things, because you can never design a human system without
making mistakes. You cannot anticipate all the problems that
you face.
But we are on our way in Washington State, and it can be
done, and anybody who says it can't simply is unwilling to look
at the facts on the ground in some States. You heard about
Oregon from Ms. Howard, and I can give you Washington. These
are the States with the lowest healthcare costs in the country.
Medicare costs in the State of Oregon and Washington are the
lowest. And we also are implementing our exchanges because we
are getting ready to make this thing work.
I yield back the balance of my time.
Mr. JOHNSON. Thank you. The gentleman's time has expired.
We don't like the program in Texas either, and there is no
taxes in Texas.
Dr. Price, you are recognized.
Mr. PRICE. Thank you, Mr. Chairman. And I want to thank the
witnesses as well. I am sorry Mr. Consedine had to leave.
I was pleased to hear, though, from Mr. Kind that nothing
is set in stone. Whew, thank goodness that nothing is set in
stone. I thought this was a law that was moving forward.
And Mr. Kind also said, look, if anybody has got a better
idea, just bring it to us, we are happy to listen to it. Well,
the fact of the matter is that during this whole process, there
were many of us who felt like we had a better idea, and we
appealed to the administration week after week after week to
just sit down with us, just talk with us about these ideas,
because we believe that you can solve all these challenges
without putting Washington in charge. And the administration
ignored us at every single turn week after week after week. So
there is great skepticism on our side when we hear someone say,
oh, if you have a better idea, we are happy to listen to it.
The question I wanted to ask Mr. Consedine was who is
subject to the penalties if you don't comply with the law? Ms.
Howard, who is subject to the penalties if the law is not
complied with; is it the Federal Government that is subject to
the penalties?
Ms. HOWARD. I think it is--which----
Mr. PRICE. Is it the Federal Government?
Ms. HOWARD. I don't believe so.
Mr. PRICE. Heck no. It is these folks, the folks in the
States, the folks trying to comply with this law. And all that
we are hearing is that the rules haven't been promulgated in
enough time to be able to put things in place, and they are
working as hard as they can.
Mr. Durham, you have a paragraph in your testimony: Clear
regulatory guidance in each of these areas is needed in the
very near future. Unless the guidance is forthcoming, it will
be difficult for health plans to complete product development,
et cetera.
How long does it take usually to--when the Federal
Government or when it--there are major changes to rules and
regulations that come out, how long does it take the plans to
come up with the programs and products to be able to market to
the public?
Mr. DURHAM. I believe it typically takes 12 to 18 months to
fully develop a product, get it through the State review and
get it to market.
Mr. PRICE. Twelve to eighteen months, Mr. Chairman.
And, Mr. Durham, am I correct in saying that the time that
the enrollment period begins that you are required to have
something available is October 1st, 2013; is that right?
Mr. DURHAM. That is correct in the statute.
Mr. PRICE. We are bumping up against that right now.
Mr. DURHAM. Yes.
Mr. PRICE. So, Mr. Chairman, it is clear that HHS has been
delinquent in their responsibilities and what they have been
able to do. And these folks are trying just as hard as they can
to comply with the law.
Mr. Durham, I also want to touch on the whole issue of
choices for patients, because as a physician, having cared for
patients, what they want are choices. They want to be able to
know who is going to take care of them. They want to be able to
know that they are going to be able to pick a plan that has the
doctors that they want in that plan to care for themselves and
for their family.
Do you know if your members are planning on offering State-
and Federal-facilitated exchanges in all the States where they
have networks?
Mr. DURHAM. I don't know that because it really depends
upon getting clear regulatory guidance here before plans can
really decide which markets they want to compete in, and so I
think that is a critical step in the process here. We have some
guidance as has been discussed today, but there is still
guidance missing, and to be able to develop products, get them
through the various State review processes, and if they have to
be a qualified health plan, there are additional requirements,
that will take time. And I think it depends in terms of plans
being able to compete in those markets when they get the final
guidance to be able put together the product and comply. So it
is very important, but they want to serve their customers,
absolutely.
Mr. PRICE. But it is possible that the guidelines will come
out and make it such that it will be impossible for them to
provide products or--to individuals out there in certain
markets; is that accurate?
Mr. DURHAM. I guess that is possible. We would hope that
would not be the case, because the plans really do want to
compete in these marketplaces.
Mr. PRICE. Mr. Durham, I also want to talk about some of
the plans--one requirement for the plan sold for small-group
markets in the exchange is they have got to meet annual
deductible limits; is that correct? Isn't that right?
Mr. DURHAM. Yes. In the statute the deductible limits are
$2,000 for a single individual and $4,000 for a couple.
Mr. PRICE. Now, my sense, my understanding about that is
that that will make it extremely difficult or problematic for
small business employees to enroll in, for example, a high-
deductible health savings account or catastrophic plan.
Mr. DURHAM. That could be the case. We haven't received the
clear guidance there yet. We expressed in terms of a bulletin
on this issue that in--reach the actuarial value requirements,
they ought to allow and count the employer's share to health
savings account and the high-deductible health plan. But
clearly I think the deductible limits in the small-group market
will be a problem since they are lower than what is offered in
today's market, and that will reduce choice for small
businesses.
Mr. PRICE. Reducing choices, that is right.
Thank you, Mr. Chairman.
Mr. JOHNSON. Thank you.
Mrs. Black, you are recognized.
Mrs. BLACK. Thank you, Mr. Chairman, and I want to thank
you for allowing me to sit on this committee although I am not
a member, and I appreciate the opportunity to be able to ask
questions as well.
Very informative panel, and thank you so much for being
here today on this very, very important topic as we move
forward.
Mr. Blumstein, I have a question for you. I thought you
brought up a very interesting question that I have been reading
about now on more and more in publications, and that is the
issue, the matter that was raised by Alder and Cannon, and in
particular does the ACA clearly provide for subsidies if the
Federal Government runs a program.
I can hear what was said by Ms. Howard or others who are
experts disagreeing with your analysis and their analysis. Who
will eventually make this decision; will this be another court
struggle here?
Mr. BLUMSTEIN. Well, nice to see you, Representative Black.
I guess we should say we are in neighboring congressional
districts in Tennessee, and thank you for your service.
I would have to say that, you know, the statements that the
IRS--some official at IRS has said that the agency has
authority is, you know--that is not a surprise. They issued the
regulation. But they are supposed to speak in a regulatory
process in a formal way. They are supposed to explain their
reasons. The reasons are lacking; they are virtually
nonexistent, in my opinion. And for someone to say, oh, well,
an IRS person said X without saying what the argument is is not
very satisfying, I must say.
In terms of how arguments occur, usually lawyers reason
with each other. And I have certainly have changed my mind on
issues, but I only change my mind in response to arguments, not
in response to these, you know, five different people said
something to disagree with you. I am sure there are millions of
people disagree with me on many things. Until you know what the
arguments are, it is hard to confront them.
I think the IRS has overreached here. They have not
explained their rationale. The rationales that are out there
are unsatisfying, they are not satisfactory. The IRS has to
establish that there is ambiguity, implicit authority to rule
not just in gross, but on this specific question. They have not
established that because the courts have said that these normal
ways of construing statutes, the exclusio unius rule is part of
the interpretive process. And so once you say that that is part
of the interpretive process of determining whether there is
ambiguity, then, to me, the IRS really has a problem.
And so it is conceded; everyone concedes that there are two
exchanges. The statute provides subsidies in one exchange; it
does not provide subsidies in the other exchange. And when that
happens, basically there can be no subsidies in the other
exchange. So then you have to look for exceptions to those
kinds of rules, and I have not seen exceptions that really
hold--in my opinion are persuasive.
So then the question you asked is who--how will this be
determined, and I see two different scenarios. If there is a
change in the administration in this election, my guess is that
Governor Romney as President will very likely have a new set of
interpretations in the Internal Revenue Service, and that this
very well--this rule may be modified or changed in some way,
because I think the argument in favor of it is very thin, it is
very results oriented.
If President Obama is reelected, then I think the rule will
stand, and then there will be a legal challenge here. I think
we will be in court. And at first I thought that it would be
hard to imagine who would bring this case, because it adds
benefits to certain people, and that is the good part. But it
also adds a tax to some people and companies, these large
companies, and they are paying $2,000 or $3,000 per employee in
taxes if their provisions don't meet the affordability criteria
and the benefits and coverage criteria of the Federal
Government.
And so I think States may have the ability to bring this
action. They will claim that they would have a competitive
advantage if they choose not to set up an exchange. So I think
you are going to find some kind of injury in the recruiting of
companies. And certainly the companies themselves will have
standing ability to challenge it. So I think you are going to
see a coalition, and coalitions are actually in the process of
being formed, I am told, where States and arguably private
employers of 50 or more employees would bring this action and
challenge the IRS ruling.
Mrs. BLACK. I think you certainly laid this all out very
well. I am not an attorney, I am a nurse, so reading your
statement, it flowed very well so that I did understand it. But
what it did make me think of is just one more complexity, one
more complexity in what is already a very complicated program,
one that we don't have a lot of definition. Frankly, I am just
hearing it from my employers and hearing it from folks back in
my State, where they are employers or they are government
officials or whatever, that there is so much uncertainty and
confusion, and it is very, very hard to make a decision when
there is not clarity.
And just to end here, we come from a State where we tried
to have a single-payer system, where we tried to have universal
care, and it was very difficult and didn't work in our State of
Tennessee. I know we're involved with our good Governor in
trying to fix a program which ultimately just really unraveled,
and we no longer have the program.
Mr. BLUMSTEIN. Yes, Governor Breseden is a hero for trying,
and I must say he is--in Tennessee, as you know, the Tennessee
Democrats, and he is a Tennessee Democrat, and I have worked
and am proud to work for him and support him.
Mrs. BLACK. Well, I served under the good Governor, and I
know what difficulty we had there with the program, and, now
that it is gone, on looking at what may be a mirror of what we
tried and didn't work. So thank you so much for your testimony
and coming here today.
Mr. JOHNSON. Thank you.
The lady's time has expired.
I want to thank the witnesses for their thoughtful
testimony and insights into the status of health insurance
exchanges. The Obama administration's repeated avoidance of a
transparent regulatory process and ongoing delays may be
politically expedient, but it has not been without substantial
cost. How do we account for the cost of unemployed Americans
losing job opportunities because businesses are not hiring
workers while the full compensation costs are unknown? Can you
put a price on the family forced to forgo healthcare coverage
because they have been priced out of the market by costly
regulations?
The more Americans learn about the law, the less they like
it. Despite years of assertions to the contrary, information is
the most significant threat to Obamacare. Holding back
necessary regulation to avoid public scrutiny is irresponsible.
Americans deserve better from their government.
As a reminder, any Member wishing to submit a question for
the record will have 14 days to do so. If any questions are
submitted, I ask the witnesses to respond in a timely manner.
Mr. JOHNSON. With that, the committee stands adjourned. I
thank you all for being here today.
[Whereupon, at 4:48 p.m., the subcommittee was adjourned.]
Public Submissions For The Record
American Society of Association Executives
[GRAPHIC] [TIFF OMITTED] 80694.061
Association of American Physicians and Surgeons
[GRAPHIC] [TIFF OMITTED] 80694.062
[GRAPHIC] [TIFF OMITTED] 80694.063
Barney Nemiroff MD
[GRAPHIC] [TIFF OMITTED] 80694.064
Citizens Council for Health Freedom
[GRAPHIC] [TIFF OMITTED] 80694.065
[GRAPHIC] [TIFF OMITTED] 80694.066
David J. Pasek MD
[GRAPHIC] [TIFF OMITTED] 80694.067
Medical Research Technology Information Consortium
[GRAPHIC] [TIFF OMITTED] 80694.068
Metro Pain Associates
[GRAPHIC] [TIFF OMITTED] 80694.069
National Association for the Self-Employed
[GRAPHIC] [TIFF OMITTED] 80694.070
Robert L. True
[GRAPHIC] [TIFF OMITTED] 80694.071
Stephen Welk MD
[GRAPHIC] [TIFF OMITTED] 80694.072
The Leukemia and Lymphoma Society
[GRAPHIC] [TIFF OMITTED] 80694.073
[GRAPHIC] [TIFF OMITTED] 80694.074
[GRAPHIC] [TIFF OMITTED] 80694.075
The National Small Business Association
[GRAPHIC] [TIFF OMITTED] 80694.076
[GRAPHIC] [TIFF OMITTED] 80694.077
[GRAPHIC] [TIFF OMITTED] 80694.078
[GRAPHIC] [TIFF OMITTED] 80694.079
[GRAPHIC] [TIFF OMITTED] 80694.080
Timothy Stoltzfus Jost
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[GRAPHIC] [TIFF OMITTED] 80694.082
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[GRAPHIC] [TIFF OMITTED] 80694.087
[GRAPHIC] [TIFF OMITTED] 80694.088
[GRAPHIC] [TIFF OMITTED] 80694.089
Walter H. Wood MD
[GRAPHIC] [TIFF OMITTED] 80694.090