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

     THE CENTER FOR CONSUMER INFORMATION AND INSURANCE OVERSIGHT, AND THE
         ANNIVERSARY OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT

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

                                    HEARING

                                   BEFORE THE

                  SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 MARCH 21, 2012

                                   __________

                               Serial No. 112-129

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

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                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman

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

                                     _____

                  Subcommittee on Oversight and Investigations

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

                                      (ii)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Cliff Stearns, a Representative in Congress from the State
      of Florida, opening statement..................................     1
        Prepared statement...........................................     3
    Hon. Diana DeGette, a Representative in Congress from the State
      of Colorado, opening statement.................................     5
    Hon. Michael C. Burgess, a Representative in Congress from the
      State of Texas, opening statement..............................     6
    Hon. Marsha Blackburn, a Representative in Congress from the
      State of Tennessee, opening statement..........................     7
    Hon. Steve Scalise, a Representative in Congress from the State
      of Louisiana, opening statement................................     8
    Hon. Henry A. Waxman, a Representative in Congress from the State
      of California, opening statement...............................     8

                                   Witnesses

    Hon. Ron Johnson, a United States Senator from the State of
      Wisconsin......................................................    24
        Prepared statement...........................................    26
    Hon. Donna F. Edwards, a Representative in Congress from the
      State of Maryland..............................................    29
        Prepared statement...........................................    31
    Steven B. Larsen, Director, Center for Consumer Information and
      Insurance Oversight, Centers for Medicare and Medicaid
      Services, Department of Health and Human Services..............    39
        Prepared statement...........................................    42

                               Submitted Material

    Report, dated February 17, 2012, ``Early Retiree Reinsurance
      Program: Reimbursement Update,'' submitted by Mr. Waxman.......    10

     THE CENTER FOR CONSUMER INFORMATION AND INSURANCE OVERSIGHT, AND THE
         ANNIVERSARY OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT

                                  ----------

                           WEDNESDAY, MARCH 21, 2012

                      House of Representatives,
           Subcommittee on Oversight and Investigation,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:02 a.m., in
    room 2322 of the Rayburn House Office Building, Hon. Cliff
    Stearns (chairman of the subcommittee) presiding.
        Members present: Representatives Stearns, Terry, Murphy,
    Burgess, Blackburn, Gingrey, Scalise, Griffith, Barton,
    DeGette, Schakowsky, Green, Christensen, Dingell, and Waxman
    (ex officio).
        Staff present: Gary Andres, Staff Director; Sean Bonyun,
    Deputy Communications Director; Paul Edattel, Professional
    Staff Member, Health; Julie Goon, Health Policy Advisor; Sean
    Hayes, Counsel, Oversight and Investigations; Debbee Keller,
    Press Secretary; Katie Novaria, Legislative Clerk; Andrew
    Powaleny, Deputy Press Secretary; Alan Slobodin, Deputy Chief
    Counsel, Oversight; Alvin Banks, Democratic Investigator; Phil
    Barnett, Democratic Staff Director; Brian Cohen, Democratic
    Investigations Staff Director and Senior Policy Advisor;
    Elizabeth Letter, Democratic Assistant Press Secretary; Karen
    Lightfoot, Democratic Communications Director, and Senior
    Policy Advisor; and Matt Siegler, Democratic Counsel.

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

        Mr. Stearns. Good morning, everybody. I call to order this
    subcommittee's hearing on the Center for Consumer Information
    Insurance Oversight during the week of the 2-year anniversary
    of the Patient Protection and Affordable Care Act.
        My colleagues, it has been 2 years since the health care
    law was forced on the American people on a purely partisan
    basis. As we have done since its initial passage, we continue
    to evaluate the effect the law has on individuals, the health
    care industry and the United States government. It is fairly
    obvious what those effects are: number one, higher cost, higher
    premiums, and increased government control.
        Now, these are not partisan points. These are objective
    facts. Proponents of the law promised lowered premiums, they
    promised lowered costs, and they promised that if you didn't
    want your coverage to change, it would not. That is simply not
    the case.
        This month, the Congressional Budget Office announced that
    the 10-year cost for the bill is nearly $2 trillion,
    substantially higher than the figure used when the law was
    passed. The CBO also reported that as many as 20 million
    Americans could lose their current coverage, despite the
    President's countless promises that if you liked your coverage
    you could keep it. These are not partisan talking points. This
    is the analysis of the non-partisan Congressional Budget
    Office.
        Meanwhile, the implementation of the law has failed to
    inspire confidence in the future of Obamacare. The cost and
    premium increases for some were so large that a waiver program
    had to be created to excuse over 1,700 companies, insurers and
    individuals from the law's effects. For example, one business
    from my home State of Florida needed a waiver so that 34,000
    individuals did not face significant premium increases or the
    loss of their coverage. Yet, these waivers still expire in
    2014, and I fear the premium increases and loss of coverage
    will become unavoidable for over 3 million Americans.
        The Early Retiree Reinsurance Program is practically broke.
    In fact, we will probably learn from one of the witnesses today
    whether this program, which was supposed to last until the year
    2014, has finally run out of money. As of last month, it had
    already spent $4.7 billion of its $5 billion budget.
        Despite predictions that 375,000 individuals would sign up
    for the temporary high-risk pools in the first year, only
    50,000 have signed up 2 years later.
        The countless pages of regulations, rules and requirements
    for Obamacare have been incredibly confusing. To my
    constituents and individuals throughout the country, these
    massive new rules and regulations demonstrate the increasing
    interference of the Federal Government into their lives, while
    to the business community, the uncertainty they create makes
    planning for the future nearly impossible.
        Lastly, the creation of the Independent Payment Advisory
    Board, the IPAB, has been met with universal distain by the
    medical community and our seniors. Today we are debating on the
    House Floor a bill to repeal this board of unelected
    bureaucrats charged with cutting Medicare payments to doctors
    and hospitals.
        Of course, next week the Supreme Court will address the
    question of whether this unprecedented reach into every
    American's life is permitted by the Constitution, but today, my
    colleagues, we want to evaluate the law's effects since its
    passage.
        Today's hearing is unique because we will start off with a
    member panel featuring both Senator Ron Johnson from Wisconsin
    and our fellow House Member Donna Edwards. I welcome both of
    them this morning. I thank them for appearing and contributing
    their time. We also have Mr. Steven Larsen joining us again
    today. Mr. Larsen is the Deputy Administrator and Director for
    CCIIO and has previously been a witness of both this committee
    and the Subcommittee on Health. So we welcome him back also and
    thank him for joining us today.
        [The prepared statement of Mr. Stearns follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Stearns. I would like to recognize the ranking member,
    Ms. DeGette.

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

        Ms. DeGette. Thank you very much, Mr. Chairman.
        I want to welcome our witnesses today. I am glad to see our
    favorite friend, Steve Larsen, the Director of the Center for
    Consumer Information and Insurance Oversight, and of course we
    are looking forward to hearing from our colleagues, Senator Ron
    Johnson and Representative Donna Edwards. Representative
    Edwards, it is nice to see a woman on a panel here to talk
    about the women's health provisions of the Affordable Health
    Care Act.
        Mr. Chairman, in the spirit of basing today's oversight
    hearing on the facts, I want to briefly describe some of the
    benefits of the Affordable Care Act that have or will soon go
    into effect. Because of this law, 2.5 million young adults who
    were previously uninsured now have health insurance coverage on
    their parents' policies. Five point one million seniors have
    saved an average of more than $600 each on their prescription
    drugs through Medicare. More than 30 million seniors and more
    than 80 million Americans overall now have access to
    preventative care with no copays, coinsurance or deductibles.
    Over 100 million Americans with private insurance no longer
    have to worry about the worst abuses of the insurance industry.
    Their coverage cannot be revoked if they get sick, and they no
    longer have to fear hitting a lifetime coverage limit because
    of unexpected medical costs.
        Mr. Chairman, this new health reform law does so much good
    for so many people, and under the mantra of repeal and replace,
    all the Republican majority has done is vote to repeal it. Now,
    we have already had two votes in this Congress to repeal the
    Affordable Care Act in the last year, and yesterday
    Representative Ryan introduced his budget, which would not only
    repeal the health care law but would decimate Medicare and
    Medicaid to boot.
        Mr. Chairman, I am wondering when we are going to start
    having hearings on the second part of repeal and replace, which
    is the replace part of the Affordable Care Act.
        I want to give you a few examples of how the efforts to
    repeal but not replace health care law would hurt women in
    particular. In July 2011, the prestigious Institutes of
    Medicine made recommendations regarding preventative health
    services for women. These experts recommended insurance
    companies cover the cost of screening for cervical cancer,
    counseling and screening for sexually transmitted infections,
    annual well women preventative care visits, screening and
    counseling for domestic violence, and services for pregnant
    women. Using authority granted by the Affordable Care Act, the
    Department of Health and Human Services issued guidelines
    ensuring the full range of preventative services outlined by
    the IOM will be covered by health plans and available to all
    women without copayments, coinsurance or deductibles. Mr.
    Chairman, this preventative care will save women's lives and
    save money, but the proposal to repeal but not replace the law
    that makes sure women could get this care has not been
    answered.
        That is not all the majority has tried to repeal. Earlier
    this week, the National Women's Law Center released a report on
    the pervasive discrimination in the insurance market for women.
    The report found that the same health insurance policy costs a
    woman 30, 50 or even 85 percent more than a man of the same
    age, even if maternity care is not covered. Mr. Chairman, this
    is simply wrong, and thanks to the Affordable Care Act, it will
    not continue. But all I have seen are proposals to repeal and
    not to replace the law that would prevent health insurance
    discrimination against women.
        Mr. Chairman, the facts do not support the drive to repeal
    this bill, but facts don't seem to matter in this case.
    Republicans have already decided in advance that the law will
    not work, and the facts have become irrelevant. Let me give you
    an example. In fact, Mr. Chairman, you talked about it in your
    opening statement. Last week, the Congressional Budget Office
    released new Affordable Care Act estimates. Committee
    Republicans were quick to claim that the CBO's estimates had
    changed and this was proof that health care reform had failed.
    There is only one problem: this is incorrect. Earlier this
    week, CBO Director Doug Elmendorf spoke out about this
    misrepresentation and here is what he had to say: ``Some of the
    commentary on these reports has suggested that CBO and the
    Joint Committee on Taxation have changed their estimates of the
    ACA to a significant degree. That is not our perspective. For
    health insurance coverage, the latest estimates are quite
    similar to the estimates we released when the legislation was
    being considered. The estimated budgetary impact of the
    coverage provisions has also changed little.''
        Mr. Chairman, CBO concluded this year what they concluded 2
    years ago when health care reform was passed: the Affordable
    Care Act will improve health care coverage for hundreds of
    millions of Americans. It will cover tens of millions of the
    uninsured. It will improve Medicare and it will cut the
    deficit. Millions of Americans are seeing the benefits of
    health care reform already, and these benefits will continue in
    the future. Thank you.
        Mr. Stearns. I thank my colleague and recognize Dr. Burgess
    for 2 minutes.

    OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
                  IN CONGRESS FROM THE STATE OF TEXAS

        Mr. Burgess. I thank the chairman for the recognition.
        You know, I have really been interested in this, what
    started life as an agency, the Office of Consumer Information
    and Insurance Oversight, for a long time. It has always been a
    little bit of a mystery to me. This is the office that is the
    lead implementation force, the referee on meeting guidance for
    consumers, States and insurance companies on the Affordable
    Care Act, but nowhere in the Affordable Care Act is there any
    reference to the Office of Consumer Information and Insurance
    Oversight. It was a fabrication by the Secretary of Health and
    Human Services. Now, when the committee began to look into this
    in November of 2010 and January of 2011, the agency morphed
    into the Center for Consumer Information and Insurance
    Oversight and was drawn back into the Centers for Medicare and
    Medicaid Services. And it has been tough to get information out
    of this agency. Yes, sometimes it has come but it has come in
    small morsels and it has required an inordinate amount of staff
    time in order to get the budgetary information, and by the time
    we receive it, it is frequently months out of date.
        Well, the operations of the of the Center for Consumer
    Information and Insurance Oversight are now under the aegis of
    the Centers for Medicare and Medicaid Services. This is the
    most powerful health agency on earth, and indeed that the earth
    has ever known, certainly within the Federal Government,
    because they have under their control now Medicare, Medicaid,
    SCHIP, and for the first time with the passage of the
    Affordable Care Act 2 years ago, private insurance is now
    regulated by the Federal Government in the Office of Consumer
    Information and Insurance Oversight.
        So it is essential that we as an oversight body maintain
    the oversight over this, now this very large and crucial
    organization. We have a Supreme Court hearing going on, a
    Supreme Court case being heard next week. It will be
    interesting to know what the contingency plans are at HHS and
    CCIIO should the Supreme Court not rule the administration's
    way.
        I will yield back the balance of my time.
        Mr. Stearns. The gentleman yields back.
        The gentlelady from Tennessee is recognized for 1 minute.

    OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF TENNESSEE

        Mrs. Blackburn. Thank you, Mr. Chairman.
        I want to welcome our guests. Senator Johnson, great
    article in the Wall Street Journal today on Obamacare. We
    appreciate the work you have done. Ms. Edwards, we are so
    pleased that you are with us, and Mr. Larsen, I want to welcome
    you back.
        As we look at what has happened over the past 2 years, we
    see that $500 billion has come out of Medicare. Our
    constituents are aware of this. They are concerned, and they
    look at this cost of this entire bill. Now, as the chairman
    said, what we have found out is that the cost has doubled since
    the original estimates. Those of us from Tennessee who had
    TennCare, the test cast for HillaryCare back in 1994, indeed
    reported repeatedly that the cost quadrupled within 5 years. So
    we are going to want to look at what is happening with this
    cost.
        We are concerned about it. We are concerned about the
    potential loss of coverage for 5 to 20 million Americans. We
    hear from a lot of our constituents about the escalation in
    cost of their private insurance premiums, and indeed, many of
    my constituents, female business owners, talk about their
    concern about loss of coverage and access to consistent
    coverage for elderly relatives, for children with chronic
    conditions, because they see this insurance market changing and
    they know that the changes that are in front of them are not
    going to help them with consistent health care, and we express
    those concerns and I yield back the balance of my time.
        Mr. Stearns. The gentlelady's time is expired and the
    gentleman from Louisiana is recognized for 1 minute.

     OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF LOUISIANA

        Mr. Scalise. Thank you, Mr. Chairman. I appreciate you
    having this hearing. I want to thank our panelists who are
    going to be testifying later.
        You know, I think it is important as we approach the 2-year
    anniversary of the President's health care law that we look
    back and see just what has happened, what it is doing to the
    health care marketplace, and in fact, if many of the promises
    that were made have been kept or broken, and I think what we
    have seen so far, I know as I have talked to small businesses
    throughout my district, the biggest complaint that they give
    when they talk about the things that are keeping them from
    hiring people right now, keeping them from creating jobs, is
    the President's health care law, the cost that it has added,
    the uncertainty that it has added. If you look at, you know,
    what it has done to Medicare, $500 billion was raided from
    Medicare by the President's law, and in fact the President's
    own health care actuaries confirmed that Medicare will go
    bankrupt in less than 12 years, and this is the current law of
    the land.
        And so absolutely we want to repeal it, get rid of the
    higher costs, get rid of the broken promises and the lost
    health care and the crony capitalism as we will see from these
    waivers that have been issued by many friends and supporters of
    the law whereas regular hardworking taxpayers, small businesses
    weren't able to get those same waivers. I think it is important
    that we look back at all of that and, you know, hopefully work
    to address the problems like we will be working to repeal this
    unelected board of 15 bureaucrats that would have the ability
    to ration care.
        So thanks again for having this hearing and I look forward
    to our panel. I yield back.
        Mr. Stearns. I thank the gentleman.
        The Chair recognizes the ranking member of the full
    committee, Mr. Waxman, for 5 minutes.

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

        Mr. Waxman. Mr. Chairman, as we approach the 2-year
    anniversary of the Affordable Care Act, we have an opportunity
    to highlight the tremendous benefits that this landmark law has
    and will provide for millions of Americans, and I am pleased to
    welcome our first witnesses, Senator Johnson and Representative
    Edwards, and I know we will be hearing from Steve Larsen from
    the CCIIO who will be implementing a lot of the legislation.
        But House Republicans seem determined to overturn this law
    regardless of the facts. I find it hard to understand. The
    Affordable Care Act is giving vital benefits for millions of
    Americans. We are living up to the promises of this law.
    Nationwide, the law has provided insurance coverage for over 2
    million young adults who were previously uninsured. It saves
    over 5 million seniors an average of more than $600 each on
    their prescription drugs. It provided more than 30 million
    seniors, more than 10 million children and more than 40 million
    adults new access to preventive care with no copays,
    coinsurance or deductibles. Thanks to the Affordable Care Act,
    over 100 million Americans no longer have to worry about their
    coverage being revoked if they get sick or by hitting a
    lifetime coverage limit because of unexpected medical costs.
        Last week, my staff prepared reports on the benefits of the
    Affordable Care Act in all 435 Congressional districts. Mr.
    Chairman, I would like to enter the reports for the 23 members
    of the subcommittee into the hearing record.
        Mr. Stearns. By unanimous consent, will do.
        [The information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Waxman. They show that health reform is helping
    hundreds of thousands of people in each of our districts. In my
    district, health reform has provided 8,600 young adults with
    health coverage and given 9,600 seniors an average discount of
    $700 per person on their prescription drugs under Medicare Part
    D. And Mr. Chairman, in your district, because of health
    reform, 113,000 seniors have received Medicare preventive
    services without paying copays, coinsurance or deductibles, up
    to 42,000 children with preexisting health conditions can no
    longer be denied coverage by health insurance, and 250,000 of
    your constituents no longer have to worry about lifetime
    coverage limits on their health plan. And in the months and
    years to come, even more critical benefits and protections will
    go into effect.
        Later this year, every health insurance policy sold in this
    country will begin providing consumers with a clear, consistent
    summary of the costs and benefits of their coverage like food
    and nutrition labels for health care plans.
        In 2014, when the law is fully implemented, plans in the
    private market will be sold in transparent and competitive
    exchanges where consumers can be sure that the plans they
    purchase will be there for them when they need them without
    annual or lifetime limits, regardless of a preexisting
    condition, without insurers making unjustifiable premium
    increases or wasting huge percentages of premium dollars on
    administrative costs and profits.
        These are the facts. They show the Affordable Care Act is
    working and will continue to benefit the American people. What
    won't work is the Republican alternative. They want to repeal
    the law. They say they we will repeal and replace. Now we know
    what their replacement is. From the Budget Committee chairman
    yesterday, the proposal would repeal health care reform,
    decimate Medicaid, cutting over $800 billion from this critical
    safety net program, and it would slash hundreds of billions of
    dollars from Medicare. After all the money that people
    complained about that was taken from the Medicare overpayment
    and some of the insurance companies, the Republicans would
    leave that in place and they would cut additional hundreds of
    billions of dollars as well, ending the program's basic health
    guarantee for seniors.
        Mr. Chairman, these Republican solutions are wrong. They
    would devastate Medicare and Medicaid, leave tens of millions
    of Americans without health insurance at all. Their way of
    holding down costs is to shift those costs on to the Medicare
    individuals, and for the States, they would tell the States
    here is less money for Medicaid, you can cut back on health
    care for disabled people and very, very poor people under
    Medicaid while we are going to make sure that we are going to
    give wealthier Americans further tax breaks. I think that is
    obscene and I think the American people will see through this
    Republican effort.
        Mr. Stearns. The gentleman's time is expired. We will now
    go to our witnesses. Our first panel, of course, is Senator Ron
    Johnson from Wisconsin and Congresswoman Donna Edwards from
    Maryland. We welcome both of you today. And Senator Johnson, we
    will recognize you for 5 minutes.

     STATEMENTS OF HON. RON JOHNSON, A UNITED STATES SENATOR FROM
         THE STATE OF WISCONSIN; AND HON. DONNA F. EDWARDS, A
         REPRESENTATIVE IN CONGRESS FROM THE STATE OF MARYLAND

                     STATEMENT OF HON. RON JOHNSON

        Mr. Johnson. Thank you, and good morning, Chairman Stearns,
    Ranking Member DeGette and members of the committee. Thank you
    for the opportunity to participate in today's hearing on the
    Patient Protection and Affordable Care Act.
        Unfortunately, this Orwellian-named law will neither
    protect patients nor make health care more affordable. It is my
    current mission to paint a picture of what America's health
    care system, our freedoms and our Federal budget will look like
    in the unfortunate event that Obamacare is fully implemented.
    It will not be a pretty picture.
        Nancy Pelosi famously stated that we have to pass this bill
    so you can find what is in it. I am determined to make sure we
    don't have to fully implement it to see what it will cost.
        Twenty-eight years ago, our infant daughter, like millions
    of other Americans, was saved by a health care system and
    medical professionals that dedicate their lives to saving the
    lives of others. Today, our daughter is a nurse herself helping
    to save infants in a neonatal intensive care unit. These are
    the people that President Obama chose to demonize in his quest
    to take over one-sixth of our economy. The result of his
    efforts was an ill-conceived, totally partisan, 2,700-page bill
    whose benefits were wildly overstated and whose costs will
    prove to be dangerously understated.
        Let me start there, understated costs. To sell the fiction
    that Obamacare would provide health care to 25 million
    uninsured Americans without adding one dime to our deficit, the
    original budget window included 10 years of revenue and
    fictional cost savings totaling $1.1 trillion to pay for only 6
    years of benefits totaling $938 billion. Increased taxes, fees
    and penalties account for roughly half of the $1.1 trillion
    ``pay for.'' The other half supposedly results primarily from
    reduced payments to Medicare providers and cuts in Medicare
    Advantage. But Congress has not allowed the enactment of the
    $208 billion provider payment cuts required under the
    Sustainable Growth Rate formula because it understands those
    cuts would dramatically reduce seniors' access to care. For the
    same reason, how likely is it that Obamacare's Medicare
    reductions will actually occur.
        In addition, how likely is it that on net, only 1 million
    out of the 154 million Americans that have employer-sponsored
    health insurance will lose that coverage and be forced to
    obtain coverage through the exchanges. Not very. Yet that was
    the CBO estimate that helped produce Obamacare's unrealistic
    deficit reduction score.
        Instead of trying to interpret and comply with over 15,000
    pages of rules and regulations, and instead of paying $20,000
    in 2016 for family coverage, why wouldn't business owners
    simply pay the $2,000 penalty? And by dropping coverage under
    Obamacare, they wouldn't be exposing their employees to
    financial risk. They would be making them eligible for huge
    subsidies in the exchanges, $10,000 if their household income
    is $64,000. A recent study by McKenzie and Company found that
    30 to 50 percent -- that would be 48 to 80 million Americans --
    30 to 50 percent of employers plan to do just that, drop
    coverage.
        CBO's March 2012 baseline estimates 9-year Obamacare
    outlays will exceed $1.9 trillion. Adding that many individuals
    to the exchanges could add trillions to these projections. Can
    America afford to take that risk? Those trillions of dollars
    for Obamacare will be taken from hardworking American taxpayers
    and the private sector filtered through the Federal Government
    in order for Washington to dictate the terms of health care
    consumption and delivery to every American. If that happens, we
    will be ceding a significant portion of our personal freedoms
    for the false promise of economic and health care security.
        There are too many uncertainties, and the stakes are far
    too high to proceed with implementing Obamacare. It is time to
    put the brakes on until we fully understand all its costs and
    consequences.
        In closing, let me ask some questions the administration
    should answer before Obamacare is fully implemented and it
    really is too late. If the Medicare cuts actually are enacted,
    how many doctors will stop taking Medicare patients? What
    services will be cut? How will quality suffer? Isn't this how
    rationing begins?
        Because Medicaid reimbursement rates are often lower than
    provider costs, approximately 40 percent of providers do not
    accept Medicaid patients. How will the remaining 60 percent
    handle the 25 million new Medicaid beneficiaries?
        Faith in the Federal Government is appropriately at an all-
    time low. How many Americans actually believe Washington can
    effectively and efficiently take over one-sixth of our economy?
    Does anyone think government would have invented the iPhone or
    iPad? What will happen to medical innovation under government
    control?
        Will Americans like Federal bureaucrats telling them they
    cannot get mammograms until they reach the age of 50, or the
    Independent Payment Advisory Board becoming Medicare's de facto
    rationing panel?
        Defensive medicine and junk lawsuits cost Americans
    hundreds of billions of dollars each year. Why was malpractice
    reform rejected? Did it have anything to do with President
    Obama's support from trial lawyers? Why would anyone think that
    increasing taxes on health insurance plans, medical devices and
    drugs would help bend the cost curve down? The actual result:
    instead of lowering the cost of a family insurance plan by
    $2,500 per year as President Obama promised, family plans are
    now $2,200 higher. Does anyone really think that on net, only 1
    million American will lose their employer-sponsored care and be
    forced into the exchanges? And finally, why have 1,722 waivers
    covering 4 million Americans been granted if implementing
    Obamacare doesn't threaten current health insurance plans?
        President Obama promised: ``If you like your health care
    plan, you will be able to keep your health care plan. Period.
    No one will take it away, no matter what.'' I am not sure what
    you would call that statement, but whatever you call it, it was
    a doozy.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Johnson follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Stearns. I thank you, Senator, and we recognize the
    gentlelady from Maryland for 5 minutes.

                   STATEMENT OF HON. DONNA F. EDWARDS

        Ms. Edwards. Thank you, Mr. Chairman and Ranking Member
    DeGette, and thanks for holding this important and timely
    hearing on the Nation's health care system, and for the
    opportunity to be here to testify today.
        I represent Montgomery and Prince George's counties right
    outside of Washington, D.C. Even in my Congressional district
    close to the Nation's capital, there are thousands of people
    who go without health care every day. I was honored to preside
    over the passage of the Affordable Care Act in the House and
    filled with pride actually to witness President Obama sign the
    landmark bill into law.
        Although the health care reform law has faced opposition
    from some, I am proud and steadfast in my support of the
    Affordable Care Act and the preventive care, the primary care,
    the community-based care and the quality care that will now be
    received by millions of Americans.
        Before the enactment of the Affordable Care Act, our health
    care system had been failing a large part of our population who
    most needed insurance coverage. In a national survey, 12.6
    million non-elderly adults, 36 percent of whom tried to
    purchase health insurance directly from an insurance company in
    the individual market, had been discriminated against because
    of a pre-existing condition just in the last 3 years. With a
    Federal high-risk pool, these Americans will have access to a
    critical program that provides lifesaving health care coverage,
    and the Affordable Care Act also encourages and enables people
    to seek out care sooner, saving the system money and increasing
    the chance of positive health outcomes in the long run. That we
    should look to as very encouraging.
        I worked with my colleagues, and I was interested to hear
    you, Mr. Chairman, particularly Jan Schakowsky, in championing
    a provision that holds insurance companies accountable for
    excessive premium increases. That ensures affordability for
    working families who have health care coverage, but for whom
    costs are skyrocketing.
        In my congressional district, this provision has already
    helped protect 190,000 residents from price gouging by
    requiring health insurers to post and justify rate increases of
    10 percent or more. This is true all across the country in
    every single Congressional district.
        At this important 2-year anniversary, for constituents in
    my district and throughout the country, health care reform has
    already delivered important and tangible benefits due to a
    number of provisions in effect today. I am proud that our
    system would allow me the option to keep on my health insurance
    policy my 23-year-old up until age 26 in the event that he
    doesn't receive coverage through an employer.
        I visit senior centers regularly where seniors now
    understand that the Affordable Care Act strengthens their
    Medicare benefit by closing the prescription drug donut hole
    and expanding coverage, all while lowering costs to them. Under
    the expanded benefits of Medicare, seniors can receive annual
    physical and preventive screenings. And the small businesses in
    my district and all across this country have received the
    benefit of a 35 percent, enhanced to 50 percent in 2014, tax
    credit to help them as employers cover the cost of premiums
    paid to insure their workers. And with the filing deadlines
    approaching, employers should look for that credit filing on
    their return.
        And for women, and I am proud that for women all across
    this country Affordable Care Act has had a remarkable impact on
    their ability to finally obtain affordable and comprehensive
    coverage. According to The Commonwealth Fund, when the law is
    fully implemented, nearly all the 27 million women in this
    country ages 19 to 64 who were uninsured in 2010 will gain
    health coverage that meets their needs at a fair price.
        By 2014, health care reform will keep insurance companies
    from denying women coverage due to preexisting conditions like
    experiencing domestic violence or pregnancy or even acne. What
    a shame that we needed a law to ensure that insurance companies
    would not penalize women for those or other conditions, but you
    know what? I am happy we have that law to do exactly that.
        And further, as members of this panel, male and female,
    know, the act of choosing a doctor for your health needs is an
    important and personal decision. The Affordable Care Act
    ensures that women are able to choose any doctor they trust
    without a referral. As if the insurance companies didn't have
    enough influence over the health care decisions of women,
    before the passage of the Affordable Care Act insurers could
    also choose to charge a woman more for her insurance policy
    just because of her gender. The National Women's Law Center
    reports the practice of charging women more than men for the
    same coverage cost women $1 billion a year with little evidence
    to explain the difference.
        And now with the Affordable Care Act in place and the
    scientific findings of the Institute of Medicine, women will
    receive a full range of preventive services at no cost
    including mammograms, colonoscopies, Pap tests, as well as
    well-woman visits, HPV testing, contraception methods, and
    support for interpersonal and domestic violence. To date, 20
    million women have accessed these free preventive services.
        And for minority women like me who too often go uninsured,
    the Affordable Care Act will provide equal access to health
    care and close health disparity gaps that plague women in
    underserved communities.
        And so I appreciate the opportunity to be here today to
    celebrate the good news of health care delivery for the
    American people through the Affordable Care Act, and I thank
    you, and I am happy to answer any questions.
        [The prepared statement of Ms. Edwards follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Stearns. I thank both of you.
        Senator Johnson, do you have time to answer any questions?
        Mr. Johnson. I believe so. I will run out of here at the
    last minute.
        Mr. Stearns. OK, because I saw that you might have a vote
    here in the Senate.
        I guess the question for you would be, what experiences in
    the private sector have you had that give you insight into our
    impending problem with Obamacare?
        Mr. Johnson. Well, really, two pretty significant ones.
    First of all, as a small- to medium-size business owner, I
    purchase health care for the people who worked with me for over
    31 years, so I certainly understand the thought process, the
    decision-making process that will be going into those health
    care purchasing decisions moving forward and certainly the
    passage of Obamacare changes the equation entirely. I mean, put
    yourself in the position of a business owner trying to comply
    with currently 15,000 pages, and that is just simply going to
    grow, and then take a look at the cost equation. So we have
    totally changed the equation in terms of how are we going to
    buy health care.
        But the other experience, life experience, that was pretty
    significant was the birth of our first child, our daughter,
    Carrie, who was born with a very serious congenital heart
    defect, her aorta and pulmonary artery reversed. So the first
    day of life, she was rushed down where, you know, one of those
    doctors came in 1:30 in the morning and saved her life. And
    then 8 months later when her heart was the size of a small
    plum, some other incredibly dedicated medical professionals
    reconstructed the upper chamber of her heart. So her heart
    operates backwards right now. But she is a nurse herself and
    she is a 28-year-old woman practicing medicine because my wife
    and I had the freedom. Again, this was ordinary insurance
    coverage. This was no Cadillac plan. We had the freedom to seek
    out the most advanced surgical technique at the time which
    allowed Carrie to have such a wonderful result. So I have got
    very direct experience both in terms of buying health care as
    well as being on the consumption side of that in a wonderful
    story that has a very happy ending.
        Mr. Stearns. Senator, I also had a small business myself,
    and understanding the complexities. Do you think if health care
    is put in place, do you think employers will sort of dump
    employees all into the exchanges? What is your estimation of
    what will happen there?
        Mr. Johnson. Well, that is a concern, and the CBO initially
    estimated only a million people would, but there have been
    surveys, and the McKenzie is the one that I quoted that said 30
    to 50 percent of employers--and by the way, that percentage
    goes up the more they know about the health care law--plan to
    do just that.
        Now, will they actually do it? Nobody knows. But what we
    are trying to get the CBO to do is let us give us the
    information just in case. I mean, what if half of the people
    that get their insurance through employer-sponsored plans
    actually lose it and access the exchanges under very high
    levels of subsidy? That would be 75 to 80 million people, and
    then of course, that would result in cost shifting, putting
    more pressure on premium rates, which would cause even more
    employees to lose their health care overage. And quite frankly,
    Chairman, I think that is exactly the way that this health care
    was designed. It was designed to lead to government takeover of
    the health care system basically a single-payer system.
        Mr. Stearns. Congresswoman Edwards, you heard the opening
    statement of Ms. DeGette in which she talked about the
    Medicare, and I think either she or Mr. Waxman talked about
    Medicare and how the Paul Ryan budget would impact Medicare.
    Are you concerned, I think like a lot of us are, that when we
    passed Obamacare, there was a cut of $500 billion from
    Medicare? Does that concern you at all that these cuts are,
    one, feasible or are they accounting gimmicks or will it ever
    happen, I guess?
        Ms. Edwards. Thank you, Mr. Chairman, for the question, but
    let us look at the facts. In fact, what has happened is that we
    are actually saving seniors and providing additional benefits
    with the savings that have been achieved in Medicare, because
    after all, that went back into the Medicare system, and so when
    I look at our seniors, for example, who receive--who are
    working up to that donut hole and that they now can actually
    receive a benefit that wouldn't by closing the donut hole,
    those are benefits. When I look at seniors who now can go for
    an annual physical so that they can look down the line to avoid
    illnesses or conditions that might otherwise impact them
    negatively, those seniors are actually receiving benefits
    through the savings that we actually achieve in Medicare. And
    so I think the American people should actually have the facts
    straight in terms of what we did with Medicare and what we did
    was enhance benefits for Medicare recipients so that we can
    ensure the coverage of preventive care, close the donut hole,
    and make sure that we have a system where we are able to
    enforce fraud as well.
        Mr. Stearns. I would say in defense of what you said is,
    what you are talking about, paying for subsidies, but the $500
    billion is actually impacting Medicare and this is something
    that the second panel can bring out because most of us feel
    that $500 billion will have a huge impact on Medicare and that
    is going to what I think Senator Johnson talked about, a lot of
    these doctors and others are just going to not want to take
    Medicare.
        With that, I recognize the ranking member.
        Ms. DeGette. Thank you very much, Mr. Chairman.
        Senator, thank you for coming over, slumming it with us
    here in the House. When you talked about your young daughter
    who had the heart surgery, it struck a chord with me because I
    have a daughter who was diagnosed with type 1 diabetes at age 4
    when I was in my first term in Congress, and I lived like you
    did, you know, with the uncertainty of a chronically ill child
    who would be ill for her whole life, and I was terrified for
    many, many years about the idea that when she turned 18 or when
    she graduated from college, she might be uninsurable. In fact,
    my husband and I actually went to see our attorney about trying
    to set up some kind of a fund from our earnings. You know,
    forget about college, we were worried, could she afford to pay
    for her diabetes care. And there is 17 million children in this
    country who have preexisting conditions like your daughter and
    my daughter who now will be guaranteed that they will have
    insurance. I would imagine--I know that you are against the
    Affordable Care Act and I know that you would like to repeal
    it, but I would imagine you would think it would be a good
    thing if insurance companies couldn't simply drop kids because
    they had preexisting conditions.
        Mr. Johnson. Well, first of all, there is a far simpler
    solution. We didn't need a 2,700-page bill. We didn't need----
        Ms. DeGette. What is that solution?
        Mr. Johnson. So the solution is what many States have, most
    States have, high-risk pools, and they work very well. And the
    way they work is, every insurance carrier that is licensed in
    the State has to participate in those pools, and it is a known
    risk, it is actually pooling the risk. That is what insurance
    is all about. So that when people are uninsurable, they become
    eligible for those high-risk pools and those insurance rates
    are subsidized. Again, we are a very compassionate society here
    and we want to provide a strong social safety net so we are
    very certainly supportive of that but we didn't need to pass a
    2,700-page bill and a virtual national takeover, Federal
    takeover of our health care system to accomplish that goal.
        Ms. DeGette. So in Wisconsin, for example, under the
    Affordable Care Act, there is 95,000 kids that would be in that
    situation. Does Wisconsin have a high-risk pool?
        Mr. Johnson. Yes, it does.
        Ms. DeGette. And were all of those kids covered in the
    high-risk pool?
        Mr. Johnson. That I couldn't say. Am I saying the high-risk
    pools are perfect? No, but we could have made adjustments to
    those on a State-by-State basis as opposed to a total Federal
    Government solution.
        Ms. DeGette. OK, and do you have any idea how much it would
    cost, say, in Wisconsin or Colorado to insure 95,000 kids that
    weren't already insured in those high-risk pools?
        Mr. Johnson. I don't have exact figures but I have in my
    previous life as a business owner, I have looked at the
    insurance rates for the high-risk pool in Wisconsin. They were
    very comparable to the same rates we were paying on an annual
    basis with our business plan, very comparable.
        Ms. DeGette. Right. And does every State have a high-risk
    pool like that?
        Mr. Johnson. I am not sure. Not every State but the vast
    majority do.
        Ms. DeGette. See, the question I am asking is, all of these
    17 million kids who now can't be discriminated against, these
    are kids who previously were not insured in the high-risk
    pools. So I am just wondering if you or your staff had done the
    math to figure out how much extra it would cost in the States
    to give those subsidies, because I don't know about your State
    but in my State, we are having difficulty keeping our police
    officers and our firefighters and our teachers on the payroll.
        Mr. Johnson. Let me just answer by saying I would like to
    dispel a notion, because I hear it over and over again that now
    seniors are obtaining preventive services for free and we are
    offering coverage to, you know, children up to the age of 26
    for free. Nothing is free. We are just spreading the risks. And
    I would say when we spread it and we filter it through the
    Federal Government, which by the way there aren't too many
    Americans who think that the Federal Government is capable of
    taking over one-sixth of our economy, to do it effectively and
    efficiently. I think going through a Federal government is the
    least efficient way of pooling those risks and taking care of
    those individuals.
        Ms. DeGette. OK. I hear what you are saying. I disagree but
    I hear what you are saying.
        Now, Congresswoman Edwards, I just wanted to ask you a
    question. The chairman asked you about Medicare cuts under the
    Affordable Care Act. Have you glanced at the new Ryan budget
    that was introduced yesterday?
        Ms. Edwards. Well, it is very disturbing actually because I
    think that what the new majority budget does it, it actually
    undercuts Medicare. I mean, we would in effect be saying to our
    seniors, not only are we going to get rid of the program that
    you have known and that you trust and that delivers efficient
    care; we would be saying to you, we are going to ask you to
    reach into your pocket for thousands of dollars that we know
    that you don't have in order to--I don't know. It looks to me
    it would be turning Medicare into a private kind of system
    where individual seniors would be kind of out on the
    marketplace in order to obtain their health care. I don't think
    that that is the system that the American people want, and I
    think for the seniors that I visit in my Congressional district
    and I would imagine that this is true across the country, that
    those seniors right now must be wondering what it is that we
    are thinking here on Capitol Hill that we would take a system
    that is working, that is providing a benefit that they too have
    paid into and ripping that out from under them.
        Ms. DeGette. Thank you very much.
        Mr. Stearns. The gentlelady's time has expired.
        Senator Johnson has to leave in about 5 minutes or less.
    Anybody on my side would like to ask questions? Dr. Burgess?
        Mr. Burgess. I thank the chairman for yielding.
        Senator Johnson, this is something with which I worked with
    the previous ranking member on the Health Subcommittee, Nathan
    Deal, who is now Governor of Georgia, on the preexisting
    condition issue, and I think you are exactly right. In fact,
    when Senator McCain was running for President, one of the
    difficulties he had when he articulated a very detailed plan on
    health care as opposed to an amorphous plan but the detailed
    plan that Senator McCain talked about in fact built on the very
    structure that you talked about, the already existing State
    risk pools, State reinsurance programs and I think there were a
    couple of other novel ways that States dealt with this. In
    Texas, I am a physician. I practiced for a long time. I can't
    tell you that I ever saw anyone who was covered under one of
    the risk pools but I understand since entering into this
    discussion in the last several years that there are many people
    in Texas who are covered and do not want to see that coverage
    changed in any way whatsoever. I can promise you, I never got a
    reimbursement check from the State high-risk pool as a
    physician, but at the same time, I think there is ample
    evidence that they do work.
        The problem is, that the State is limited in the amount of
    subsidy that they can provide, so if we were going to build
    something, it would have made a lot more sense to build on
    those 35 State programs that already existed. Now, Nathan Deal
    was very sensitive not wanting to create a new State mandate
    but he suggested that a Federal subsidy could be available to a
    State that was willing to provide such coverage and make it an
    incentive rather than a punishment. Those bills were introduced
    in the 111th Congress, H.R. 4019, 4020, for anyone who is
    keeping score at home. Those things are ready to go as part of
    any replacement strategy if something happens to the Affordable
    Care Act like the Supreme Court voids its existence at the end
    of June when they provide us with their ruling.
        So I just wanted to emphasize, I think you are right on the
    mark. We will hear from Mr. Larsen about the high-risk pools
    and the success they have had but we were led to believe when
    this debate was going on, and I don't believe you were in the
    Senate when the debate was going on, but we were led to believe
    through the popular media and through discussions with the
    President that this number was 5 million people, 8 million
    people, 15 million people who were not covered because of
    preexisting conditions, 50,000 people in the first 2 years of
    this new Federal subsidy that was set up and how much more
    could have been done had a program been designed that would
    have helped the States do what they were doing already, in
    other words, augmented the help that they were providing, and
    for the life of me I have never understood why we took it upon
    ourselves to set up a brand-new Federal program, a brand-new
    Federal agency, all new computers, all new staplers, and didn't
    utilize the structure that was already there in your State and
    my State and 35 other States across the country. Do you have
    any thoughts on that?
        Mr. Johnson. Before I go, I will make two points. First of
    all, as I recall, and I wasn't here at the point in time, but
    it was very difficult to get people signed up for the Federal
    program initially. With the initially set premiums, only a
    couple thousand people signed up, so they had to drastically
    the premium rate to even get the 50,000 which is way under the
    estimate. I also want to just dispel the notion that
    Republicans don't have solutions. We have plenty of solutions.
    You know, why don't we reform our malpractice and save hundreds
    of billions in defensive medicine, and finally dispel the
    notion that Medicare and Federal Government doesn't deny
    benefits. They actually deny benefits to almost twice the rate
    of large employers at about a 4 percent rate versus about a 2
    percent for most large insurance companies. So again, there is
    an awful lot of misinformation, and with that, Mr. Chairman,
    again, I appreciate it and I am going to have to go take a
    vote.
        Mr. Stearns. Senator Johnson, thank you very much for
    taking your time to come over from the Senate.
        Mr. Burgess. Let me reserve the balance of my time. We will
    let the Senator leave, but I just to make one other point on
    the preexisting conditions for kids. There was a drafting error
    in the Affordable Care Act as it was passed by the House and
    Senate and signed. Indeed, the Affordable Care Act said that
    insurance companies could not limit coverage for kids but there
    was nothing that prevented them from denying coverage to
    children. So the actual loophole that would have allowed
    insurance companies to get out from under covering preexisting
    conditions for children still existed at the signing of the
    Affordable Care Act, and because most of the insurance
    companies said ``Hey, look, we understand it was a drafting
    error, we will do the right thing and not deny coverage to
    those children.'' In fact, that is what allowed the Affordable
    Care Act to work. But it was just one more example of the
    numerous drafting errors that were contained in this thing, and
    the reason there were drafting errors was because it was rushed
    through, it was force fed through the Congress and force fed on
    the American people, which is why it has never enjoyed immense
    popularity, and we are going to get into more of that as this
    goes on. I will yield back.
        Mr. Stearns. All right. We would thank the gentlelady from
    Maryland for attending with Senator Johnson. You also can leave
    and we will go onto our second panel. Thank you.
        I would say just a comment to my colleague from Texas, that
    it would be nice to see on the Democrat side their plan to save
    Medicare. Congressman Paul Ryan has come up with a plan to save
    Medicare and it would be awfully nice to hear either the
    President or the Democrats provide us a plan.
        With that, the second panel is welcomed. We have just one
    witness, my colleague, Mr. Steve Larsen, the Director of the
    Center for Consumer Information and Insurance Oversight.
        Mr. Larsen, I think you are aware that the committee is
    holding an investigative hearing, and when doing so has had the
    practice of taking testimony under oath. Do you have any
    objection to testifying under oath?
        Mr. Larsen. No.
        Mr. Stearns. OK. The Chair then advises you that under the
    rules of the House and the rules of the committee, you are
    entitled to be advised by counsel. Do you desire to be advised
    by counsel during your testimony this morning?
        Mr. Larsen. No.
        Mr. Stearns. In that case, if you would please rise and
    raise your right hand?
        [Witness sworn.]
        Mr. Stearns. You are now under oath and subject to the
    penalties set forth in Title XVIII, Section 1001 of the United
    States Code. We welcome your 5-minute summary of your written
    statement.

       STATEMENT OF STEVE LARSEN, DIRECTOR, CENTER FOR CONSUMER
     INFORMATION AND INSURANCE OVERSIGHT, CENTERS FOR MEDICARE AND
       MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES

        Mr. Larsen. Chairman Stearns, Ranking Member DeGette,
    members of the subcommittee, thank you for opportunity today to
    highlight the efforts of CMS and my office, CCIIO, in
    implementing the provisions of the Affordable Care Act.
        Over the last 2 years, we have been focusing on
    implementing the ACA as smoothly as possible in a way that
    continues to strengthen the productive partnership between the
    private sector and our office and the government.
        I would like to highlight some of the very important
    provisions of the ACA and the benefits that they provided to
    millions of Americans already. For example, in the past, young
    adults making the transition from school to work have been more
    likely than any other group to go without health insurance. The
    ACA makes it easier for younger Americans to get health
    insurance coverage because the law allows young adults to be
    covered under their parents' policies up through the age of 26,
    and about 2-1/2 million young adults have already gained health
    insurance coverage because of this part of the law.
        In addition to helping young people find health care
    coverage, CMS established the Preexisting Condition Insurance
    Program or PCIP, which we talked about. It was created under
    the ACA and it provides an affordable coverage option for
    uninsured people with preexisting conditions until the broader
    reforms of the ACA take effect in 2014. Already, PCIP is
    helping 50,000 Americans with preexisting medical conditions to
    access critical health care services. Many of these individuals
    have been diagnosed with cancer and other life-threatening
    diseases, and without PCIP would have no other coverage
    options.
        Besides ensuring that people have access to private health
    insurance coverage, CMS is working to implement new rights and
    benefits for consumers. For example, insurance companies can no
    longer drop or rescind someone's policy simply because they
    made an unintentional mistake on their application. Insurance
    companies can't place lifetime limits on the dollar value of
    the benefits in the policy. Before, cancer patients and
    individuals with serious and chronic and expensive diseases
    often had limited treatment or went without treatment because
    they had reached their insurer's lifetime dollar limits on
    their health insurance coverage. Now with this provision in
    place, about 105 million Americans including nearly 28 million
    children enjoy better coverage without the worry of bumping up
    against lifetime dollar limits.
        Also, about 54 million Americans in new insurance plans are
    receiving expanded coverage for recommended preventive services
    without additional out-of-pocket payments including colonoscopy
    screenings for cancer, Pap smears and mammograms for women,
    well-child visits, flu shots and other preventive services.
        The ACA also increases transparency for consumers. Starting
    this September, health insurers in group health plans will have
    to provide clear information about health plan benefits and
    coverage in a consistent, easily understandable format that
    allows apples-to-apples comparisons.
        The ACA also helps make sure people get value for insurance
    premiums. For example, the rate review program does this by
    making sure that proposed rate increases that exceed 10 percent
    in the small group and individual market are reviewed by
    experts in order to make sure that they are reasonable. Rate
    review is primarily a State-based reform with the majority of
    the States, not HHS, conducting these reviews.
        The medical loss ratio provision makes sure that people get
    value for their premiums by requiring that insurance companies
    spend 80 or 85 percent of the premium revenue for medical care
    and to improve the health care quality for their customers. We
    know many insurers are moderating their rates in order to meet
    the MLR standard already.
        We have worked steadily towards establishing the Affordable
    Insurance Exchanges. We have issued extensive guidance to
    States and other stakeholders over the last 2 years in many
    areas related to exchanges, and earlier this month we released
    the final rules on exchanges that provide flexibility to States
    to build exchanges that work for them in their State. And we
    know that States are making good progress toward establishing
    their own exchanges.
        CMS is proud of all that we have accomplished in the last 2
    years, and I look forward to partnering with Congress, the
    States, consumers, businesses and other stakeholders across the
    country to strengthen insurance options.
        Thank you for the opportunity to discuss the work that CMS
    and CCIIO has been doing to implement the ACA.
        [The prepared statement of Mr. Larsen follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Stearns. Mr. Larsen, thank you very much. I will start
    with my questions.
        You know, the main point of contention is the mandate, and
    of course, the Supreme Court will be looking at that shortly.
    So if you can, just answer the question yes or no. Is your
    office going to be responsible for enforcing the mandate? Yes
    or no.
        Mr. Larsen. Well, in conjunction with our colleagues at the
    Department of Treasury and the IRS.
        Mr. Stearns. So will you have the main responsibility in
    your office for enforcing the mandate?
        Mr. Larsen. Well, the individual responsibility provisions
    ultimately are enforced through the Tax Code, so it is largely
    IRS and Treasury.
        Mr. Stearns. But have you worked out any provisions in
    terms of a narrative on how you are going to enforce the
    mandate in your office?
        Mr. Larsen. Not yet, no.
        Mr. Stearns. And since you run the exchange, how will you
    determine if an individual has purchased health care or not?
        Mr. Larsen. Well, that is one of the issues that we are
    working through now is the data that we collect through the
    exchanges and through employers to know who has coverage and
    who doesn't, and again, that is----
        Mr. Stearns. Will this data be precise? Will you be able to
    tell if a person has health care or not?
        Mr. Larsen. Yes.
        Mr. Stearns. And how will you determine that?
        Mr. Larsen. Well, it will involve getting information from
    both employees and individuals and----
        Mr. Stearns. Is this going to be voluntary?
        Mr. Larsen [continuing]. From employers to provide the
    information.
        Mr. Stearns. Will this be voluntary to the employees and to
    the employer?
        Mr. Larsen. Well, the employees and individuals will want
    to provide the information so that they can know that we know
    that they have health insurance coverage, and employers will
    want to give the information so that they know that they----
        Mr. Stearns. So you are saying it is all voluntary?
        Mr. Larsen. Well, I am not sure quite how to answer that
    because obviously there are----
        Mr. Stearns. I think it is not voluntary.
        Mr. Larsen. Well, there are financial provisions that
    apply.
        Mr. Stearns. It is called a mandate.
        Mr. Larsen. People can choose----
        Mr. Stearns. Let me ask you, what kind of manpower is going
    to be required in your office to enforce this mandate?
        Mr. Larsen. That I don't know yet.
        Mr. Stearns. So you have no idea whether you are going to
    increase the number of people?
        Mr. Larsen. Well, we have plans to increase our staff in
    connection with the areas that we are enforcing. I don't know
    what the plans are with respect to IRS.
        Mr. Stearns. OK. When does enrollment in the exchanges
    begin?
        Mr. Larsen. Well, the exchanges have to be up and running
    in January of 2014, and so there will be an open enrollment
    preceding that in October of 2013.
        Mr. Stearns. What rulemaking have you issued with regard to
    these exchanges?
        Mr. Larsen. We have issued a number of rules both final
    rules, proposed rules and then guidance to the States on a
    range of topics. As I mentioned, we did just release the final
    exchange rule. There is a rule that we call the 3 R's rule that
    is----
        Mr. Stearns. Three R's?
        Mr. Larsen [continuing]. Insurance, risk adjustment and
    risk quarters, which are financial mechanisms to stabilize the
    market in 2014, so that final rule was issued. There were final
    rules on the Medicaid provisions that relate to exchanges as
    well, and there have been a number of papers and bulletins that
    we have released on topics such as----
        Mr. Stearns. It sounds a little complicated.
        Mr. Larsen. Well, it is not complicated but there is a lot
    of work to do to get ready for 2014.
        Mr. Stearns. When can we expect the rules on essential
    health benefits and actuarial value to be released?
        Mr. Larsen. Hopefully soon. We are working on that. We
    released initial guidance to the States back in December and we
    have issued additional guidance after that in the form of
    questions and answers, and we know States and issuers are
    anxious to get that information, so hopefully in the near
    future.
        Mr. Stearns. Have you conducted any analysis of the effect
    on family or individual premiums?
        Mr. Larsen. We have not conducted an analysis of that at
    this point.
        Mr. Stearns. Who is going to do that, or when it is going
    to be done?
        Mr. Larsen. Well, we will be doing that. I know CBO has
    looked at that. A number of private entities have looked at
    potential rate impacts. States have looked at that. It does
    vary----
        Mr. Stearns. Wouldn't this affect some of the decisions you
    make? You are saying CBO is going to do this but shouldn't you
    folks do analysis of your own to see the effect of the premiums
    on individuals and families?
        Mr. Larsen. We will.
        Mr. Stearns. You will? So you are not going to kick it to
    CBO, you expect to do your own?
        Mr. Larsen. Yes.
        Mr. Stearns. In the analysis that you have done so far,
    does it appear that the premiums are going to go up or go down?
        Mr. Larsen. It really varies by State and by the individual
    involved because----
        Mr. Stearns. Well, let us take Virginia, for example.
        Mr. Larsen. Well, I don't know the specifics of any
    particular State. I guess what I was going to say is----
        Mr. Stearns. Do you know the particulars of any State?
        Mr. Larsen. No, I don't know the particulars of any State.
        Mr. Stearns. OK. Your testimony states that beginning in
    2014, the exchanges will provide improved access to insurance
    coverage choices for an estimated 20 million Americans by 2016.
    How was this analysis done? Who did it? In-house?
        Mr. Larsen. The 20 million comes from the CBO report, in
    other words, when CBO estimated both the financial impact and
    the uptake through the exchanges, that was in their--and that
    was in their most recent report.
        Mr. Stearns. Are these people that already have health
    insurance or are these people that don't?
        Mr. Larsen. Well, it is a combination of people but it is a
    number of people that will be eligible for the subsidies that
    are available for people with incomes below 400 percent, and
    then there will be people that aren't eligible for subsidies
    but will still access the exchanges.
        Mr. Stearns. Would it be fair to say a lot of those people
    in the 20 million already have health insurance of their own
    and that their employer provides?
        Mr. Larsen. Most of them won't because again, according to
    the CBO estimates, you have got a reduction in the number of
    uninsured in the United States by about 30 million people as a
    result of the Affordable Care Act so there are many, many
    people that don't have access to affordable coverage today that
    will be able to have that.
        Mr. Stearns. All right. I will just conclude. Mr. Larsen,
    if you could provide this analysis for us, that would be
    appreciated.
        Mr. Larsen. OK.
        Mr. Stearns. With that, the ranking member is recognized.
        Ms. DeGette. Thank you very much, Mr. Chairman.
        Mr. Larsen, Senator Johnson seemed to--one of his main
    concerns, and this is a valid concern, I think, is what will
    happen to employer-based coverage under the Affordable Care Act
    because what we tried to do was to build, as you know--we tried
    to build off of the employer-based system that is already in
    place while adding some new consumer protections and trying to
    increase the pool so that that will decrease actuarial costs.
    CBO's most recent analysis of the employer-based health
    insurance coverage under the Affordable Care Act, as you know,
    presented a range of scenarios for potential changes in
    employer coverage, and Senator Johnson seemed to assume that
    the vast majority of employers are simply going to drop their
    employees. But while CBO said it was possible there could be a
    net reduction, they said roughly maybe 3 to 5 million might
    lose their employer-based coverage. They also said that ``a
    sharp decline in employment-based health insurance as a result
    of the ACA is unlikely'' and the CBO maintained its position
    that the bill will extend health coverage to more than 30
    million people. Do you agree with CBO's assessment that the new
    law is not likely to result in a sharp decline in employer-
    based coverage?
        Mr. Larsen. We don't think it will, and I think if you look
    at the number of models that other groups have done whether it
    is Rand Health or the Urban Institute, both of those groups
    have indicated that in fact employer-based coverage will
    increase, and then you are right, CBO estimated a very small
    reduction in employer-based coverage, but of course, that is
    across a base of about 160 million Americans.
        Ms. DeGette. So why would employers choose to keep their
    people on insurance under the Affordable Care Act? Why would
    they choose to keep their people on employer-based insurance
    under the Affordable Care Act?
        Mr. Larsen. There are many reasons. One is that both the
    employer and the employee get tax advantages from employer-
    based coverage.
        Ms. DeGette. Right. So like if there is a small employer
    that wants to offer insurance right now, and most employers do,
    I would think, they would get a tax advantage by offering that
    they don't have until this is implemented, right?
        Mr. Larsen. Exactly. Yes.
        Ms. DeGette. OK. Now, let us say there are some employees
    who lose their employer-based insurance. They are like the
    Senator. They don't want a Federal mandate so they say I am not
    going to offer the insurance. Those employees could go into the
    exchanges then, right?
        Mr. Larsen. Yes.
        Ms. DeGette. Now, what would happen to people like that?
    You know, in the economic downturn, a lot of employers just
    couldn't offer insurance to their employees. What happened to
    those employees who lose their employer-based insurance?
        Mr. Larsen. Well, they ended up in--at least now without
    exchanges and the protections in the market, they ended up
    probably without coverage.
        Ms. DeGette. I mean, they have the option in the individual
    market right now.
        Mr. Larsen. They do.
        Ms. DeGette. But that is wildly expensive in most places.
        Mr. Larsen. It is expensive, and there is underwriting so
    that if you have a preexisting condition, in most States you
    may not get coverage or you may not have coverage for your
    preexisting condition.
        Ms. DeGette. So under the Affordable Care Act, if, heaven
    forbid, an employer drops somebody, they can still go through
    the exchanges?
        Mr. Larsen. That is right.
        Ms. DeGette. And is it anticipated that those exchanges are
    going to be as costly for those individuals to buy insurance
    policies as the private market is right now?
        Mr. Larsen. Well, the exchanges bring major advantages
    compared to the individual market today. One is administrative
    efficiency, and two is a much broader risk pool that is
    segmented today and CBO estimated that there were reductions
    that would occur in premiums as a result of the better risk
    pool and the administrative efficiency.
        Ms. DeGette. Thank you. Now, I want to ask you a couple of
    questions about the women's health care benefits under the
    Affordable Care Act. I just want to ask you a basic question.
    Prior to enactment of the ACA, did all Americans and in
    particular women have access to basic preventative health
    services?
        Mr. Larsen. No.
        Ms. DeGette. Can you give me an example of the types of
    services that are not currently always covered by health
    insurance and that will be covered by the Affordable Care Act?
        Mr. Larsen. Well, many of the ones that IOM recommended
    including, you know, cancer screening, counseling, domestic
    violence screening and education, contraception, the
    recommendations that IOM came up with.
        Ms. DeGette. And the IOM did that on a scientific basis,
    deciding what actually was necessary for women's health,
    correct?
        Mr. Larsen. That is right.
        Ms. DeGette. And HHS implemented the recommendations of the
    Institute of Medicine?
        Mr. Larsen. We did.
        Ms. DeGette. OK. Now, my understanding is that an estimated
    20 million women nationwide are already benefiting from these
    new preventative care requirements. Is that correct?
        Mr. Larsen. Well, the broader range of preventive services
    that went into effect already, and of course, the specific
    dialog about the contraceptive services around a different
    schedule.
        Ms. DeGette. OK, but everything except for the
    contraceptive services----
        Mr. Larsen. Yes.
        Ms. DeGette [continuing]. 20 million people are already
    benefiting from that?
        Mr. Larsen. Yes.
        Ms. DeGette. One last question. Would you expect that
    preventive care benefits might result in cost savings, not only
    for patients but for the health care system overall?
        Mr. Larsen. Yes.
        Ms. DeGette. Thank you.
        Mr. Stearns. The gentlelady's time is expired.
        Dr. Burgess is recognized for 5 minutes.
        Mr. Burgess. Thank you, Mr. Chairman.
        Mr. Larsen, again, thank you for being here. Thank you for
    the information you have provided our office. In the passed
    law, there was a broad $1 billion implementation fund to
    administer the implementation of the health care law. Is that
    correct?
        Mr. Larsen. That is right.
        Mr. Burgess. Section 1005, as I recall. You provided us
    some documents November 1st, that $150 million of this fund had
    been spent by the Senator. Is that correct?
        Mr. Larsen. It sounds a little high to me but I would have
    to go back and look.
        Mr. Burgess. Well, the October numbers you provided showed
    $116 million in outlays, so that was about a $35 million
    increase, but also in October you provided information that
    there were $242 million in obligations. Now, the obligation
    figure wasn't provided for December but I have to assume that
    the obligation number had to go up as well as the number for
    outlays. Is that correct?
        Mr. Larsen. I would have to check because we executed a
    number of procurement contracts to help with the building of
    the exchanges, which would be reflected as an obligation, and
    those were done last year as opposed to the outlays, which
    were----
        Mr. Burgess. Well, here is the question. Can you tell us
    today how much money remains unobligated in the implementation
    fund?
        Mr. Larsen. The entire implementation fund? I can't. I
    mean, as I think you saw in the materials we provided in
    January, the $1 billion implementation fund is for all agencies
    at this point, so IRS, Treasury, Department of Labor, HHS. So
    there are kind of other folks that I would have to consult with
    to get you that number.
        Mr. Burgess. But still, I mean, you know of our interest in
    this and we are having the hearing, so we need the information.
        Mr. Larsen. OK.
        Mr. Burgess. And I referenced this in my opening statement.
    I mean, the Supreme Court is going to hear this case next week,
    and whether you think that is a good thing or a bad thing, I
    mean, it is a fact of life. It is going to happen. They will
    rule and they will provide us a ruling presumably before their
    term ends in June. Now, you may think that the likelihood is
    low that they would agree with Judge Vincent and the Federal
    District Court in Florida that the entire law is
    unconstitutional, not severable, therefore gone, and you may
    disagree with that, but there is a possibility that the court
    will find in accordance with Judge Vincent's ruling from
    Florida.
        Now, I already referenced in my opening statement that you
    were never authorized in statute. You don't have to worry. If
    they void the entire law, you weren't authorized in it anyway
    so you will still be there but your money won't, will it, if
    the entire Affordable Care Act were to be struck down, or does
    your money exist outside the structure of the Affordable Care
    Act?
        Mr. Larsen. You know, that is a--I hate to say it. I mean,
    I think that is a legal issue that we would have to consult
    with our lawyers. If the court were to strike down the law,
    which we don't believe it will, and that means the entire law
    as opposed to, you know, certain portions of it, I don't know
    the exact mechanism that occurs with respect to funding for the
    law. For example, the billion dollars largely is for the
    implementation of exchange-related activity.
        Mr. Burgess. You know, an observation. If I were in your
    position, and I thank God every day that I am not, but if I had
    your job and this was out there, I think I would at least have
    in the back of my mind some contingency plan for what happens
    next because you have got all these States that are planning
    their exchanges. They are all looking to you for guidance. They
    are waiting on the rules to be finalized. I mean, there is a
    lot of people whose lives will be turned upside down and you
    would be the logical place to minimize that tumultuousness, if
    that is a world.
        Mr. Larsen. Right, but there is a whole range of activities
    and provisions within the ACA, not just the individual
    responsibility, guaranteed issue, guaranteed renewability, the
    market reforms and of course the exchange provisions, many of
    which are not I think being challenged, although some people
    would like to see the whole law overturned.
        Mr. Burgess. Well, again, Judge Vincent----
        Mr. Larsen. Many people are focused primarily on the
    individual responsibility part.
        Mr. Burgess. Right, but Judge Vincent in his opinion said
    the whole thing went away.
        Donna Edwards in her testimony, she talked about how women
    are going to be able to choose any doctor they want without a
    referral. Section 1311(h) in the law, and I questioned the
    Secretary about this and she seemed absolutely unprepared to
    answer, maybe you can help us with that. Under 1311(h) in the
    law as written, really, you are not going to have the
    availability of any doctor you want. You are going to have the
    availability of any doctor that the Secretary says you can
    have, as I read Section 1311(h), the health provider only if
    such provider implements such mechanisms to improve health
    quality as the Secretary may be regulation require. Now, that
    could be something like board certification but it could also
    be quality as determined by will you accept Medicare or
    Medicaid as well as patients in the exchange. Have you all
    looked into how that actual aspect of the law is going to be
    administered?
        Mr. Larsen. I will have to go back and look at that because
    I have not focused on that particular provision.
        Mr. Burgess. It seems like no one is focusing on that
    within the agency but it is really going to be quite, again,
    tumultuous to the provider community out there if their lives
    are suddenly turned upside down by a ruling by the Secretary of
    Health and Human Services. So do everyone some--provide some
    value in doing that.
        Thank you, Mr. Chairman. I will yield back.
        Mr. Stearns. The ranking member from California is
    recognized for 5 minutes.
        Mr. Waxman. Mr. Chairman, the benefits from health reform
    are already being delivered. Millions of seniors are saving
    billions of dollars on Medicare prescription drugs. Hundreds of
    millions of Americans have new insurance protections and
    millions of children with preexisting conditions have access to
    coverage for the first time, and the law will reduce the
    deficit by hundreds of billions of dollars. Yesterday, the
    House Republicans released a new budget plan that turns its
    back on all this progress.
        Mr. Larsen, what impact would the Ryan budget have on the
    reforms your office has put into place?
        Mr. Larsen. Congressman Waxman, I will have to defer on
    that question because I actually haven't had----
        Mr. Waxman. Well, the Republican budget would repeal the
    important Affordable Care Act provisions that expand health
    care----
        Mr. Dingell. If the gentleman would yield, could you
    summarize for the record?
        Mr. Waxman. The Republican budget would repeal the
    important Affordable Care Act provisions that expand health
    care coverage and prevent the worst abuses performed by the
    insurance industry.
        If the Ryan budget became law, would insurance companies
    again be able to impose lifetime coverage limits on the 105
    million more Americans who now benefit from this protection?
        Mr. Larsen. If it were repealed, absolutely.
        Mr. Waxman. If the Ryan budget became law, would the 2.5
    million young adults who now have health insurance coverage
    continue to be covered under their parents' plan?
        Mr. Larsen. No.
        Mr. Waxman. If the Ryan budget became law, would insurers
    again be able to deny coverage to the up to 27,000 children in
    my district and the 17 million nationwide with preexisting
    conditions?
        Mr. Larsen. Yes.
        Mr. Waxman. If the Ryan budget became law, would insurers
    again be able to spend, 30, 40, even 50 percent of enrollees'
    premiums on profits and administrative costs?
        Mr. Larsen. Yes.
        Mr. Waxman. And if the Ryan budget became law, what impact
    would it have on the number of Americans without insurance
    coverage?
        Mr. Larsen. Well, they would have the situation that they
    have today which is a very challenging, broken market where it
    is difficult for individuals----
        Mr. Waxman. Thirty million Americans would be covered under
    the Affordable Care Act who are not now covered, and I assume
    that they will go without coverage if the act is repealed?
        Mr. Larsen. As many are today.
        Mr. Waxman. There is no Republican alternative to the
    Affordable Care Act benefits. They offer only repeal. But the
    Republican budget goes beyond repeal. It decimates all the
    critical consumer protections in the Affordable Care Act
    without offering any solutions to the broken insurance market.
    It puts Americans back at the mercy of the health insurance
    companies, and it leads to 33 million more uninsured Americans.
    But that is not all it does. The Ryan budget eliminates
    Medicare as we know it and destroys the Medicare safety net,
    all in the name of tax breaks for millionaires and
    billionaires. The cuts are staggering and deeply disturbing.
        The Ryan budget cuts $810 billion from Medicaid by turning
    it into a block grant and then another $931 billion from the
    program by repealing the Affordable Care Act. That is a $1.7
    trillion cut over 10 years from the program that protects poor
    children born with disabilities and pays for the care of our
    sickest and most vulnerable seniors.
        The Republican budget could not be more wrong for America.
    It would roll back the clock on the dramatic benefits we are
    already seeing from the Affordable Care Act. It would decimate
    Medicaid, cutting three-quarters of our support, three-quarters
    of our support for the sickest and most vulnerable people in
    the Nation. It would cut hundreds of billions of dollars from
    the Medicare program on top of the cuts they complain about on
    the other side of the aisle in Medicare expenditures in the
    Affordable Care Act. They keep that in place. And they would
    end the Medicare program's guaranteed benefit for seniors.
        Mr. Chairman, this is not the right path for this Nation. I
    yield back my time.
        Mr. Stearns. I thank the gentleman. I assume that was a
    question you had.
        We recognize on this side, Mrs. Blackburn is not here, Mr.
    Scalise is recognized for 5 minutes.
        Mr. Scalise. Thank you, Mr. Chairman, and Mr. Larsen, I
    appreciate you coming back to our committee as we approach the
    2-year anniversary. I know a lot of the questions that many of
    us have deal with the effects that we are already hearing from
    our constituents about, and, you know, unfortunately, the
    constituents that I talk to and especially our small business
    owners who I constantly meet with back home, the biggest
    complaint that they have is that under the rules they have
    already seen, let alone the rules that haven't been written,
    they don't see how they are going to be able to comply with the
    law and in fact many of them are facing the not desirable
    option but the almost necessity that they will no longer be
    able to provide health care for their employees. We have seen
    reports that millions of Americans will lose the health care
    that they have today that they like. You know, with that, one
    of the big promises that President Obama made was if you like
    what you have, you can keep it. Do you feel--you are under
    oath. Do you feel that that promise has been kept?
        Mr. Larsen. Yes, I do, absolutely, and I think that----
        Mr. Scalise. Well, are you denying then that there are
    already, millions of people that are facing losing their health
    care because of this law that they like?
        Mr. Larsen. Well, it is not because of this law, and I
    think if you look back----
        Mr. Scalise. That might be your opinion.
        Mr. Larsen [continuing]. In the last 10 or 20 years, and I
    have been doing this for a long time starting with when I was
    insurance commissioner, even back in the '90s, the rising
    insurance rates for small businesses was a huge issue, and that
    continues today, and it really illustrates why we need the
    Affordable Care Act.
        Mr. Scalise. Well, but if you go back to the beginning of
    the debate on the health care law, you know, 3 or so years ago,
    you know, the biggest problems back then were cost and other
    problems like discrimination against people based on
    preexisting conditions. Now, we put forth legislation that
    would have actually lowered the cost of health care. That was
    rejected by the President. We put forward legislation that
    would prevent discrimination based on preexisting conditions.
    The President's health care law has actually been scored to
    have increased the cost of health care. It actually made it
    worse. The cost is worse now. And our small businesses--and
    maybe you talk to different people than I do, and I guess that
    gets to this question of the waivers. You know, so many small
    businesses I talk to would love to have a waiver from the law,
    and even components of the law, and I know, you know, we have
    talked about this waiver issue before, you know, but it seems
    like there was a lot of crony capitalism that was played in
    issuing of waivers to people that in many cases helped support
    the law, came to Washington and said pass this law, it is
    important to pass, and then they went to the White House and
    got a special waiver from the law. How many waivers have been
    given, you know, whether from----
        Mr. Larsen. Well, first, I do have to say that is not how
    the process worked. We ran a very open, transparent fair
    process that didn't favor anybody based on what their political
    background is.
        Mr. Scalise. Well, why is it that small businesses I talk
    to----
        Mr. Larsen. The GAO----
        Mr. Scalise [continuing]. Not one of them heard about the
    waiver program, not one of them, and I tell them about it. They
    said, ``Hey, I would love to get it.'' I mean, we have a list
    here. What is the current number? I have got over 1,400
    companies that got a waiver from Obamacare----
        Mr. Larsen. Well, the waiver----
        Mr. Scalise [continuing]. Yet small businesses I talk to
    never even heard about it, and once they heard about it, you
    all ended the program.
        Mr. Larsen. Well, the waiver was for a very targeted group
    of employers that offered these mini-med policies that many
    people don't like. They don't provide great coverage. Employees
    that are in the mini-med policies----
        Mr. Larsen. According to you, but somebody who has no
    coverage versus that coverage, and they like that coverage, you
    are going to sit here and testify----
        Mr. Larsen. Well, that is exactly why we had a waiver
    program.
        Mr. Scalise [continuing]. That is not good coverage. What
    if they think it is good coverage?
        Mr. Larsen. We came to the same conclusion.
        Mr. Scalise. Shouldn't that be their choice?
        Mr. Larsen. We came to the same conclusion, which was in
    the law, the ACA specifically permitted and authorized and
    contemplated this where you would have these groups of
    policies. They are a small percentage but nonetheless they are
    something for people that have them, so the law permitted the
    Secretary to set up a waiver program. We did that for exactly
    the reason that you suggest so that people that have that
    coverage, even though it isn't great coverage, it is something
    and they can continue----
        Mr. Scalise. But did you end the program? I mean, this
    waiver program, you know, a new company that now knows about
    it, because a lot of companies have heard about it because we
    have been telling them. You know, you go look, a lot of these
    labor unions that came here and said pass this law, we need
    this law, they went to the White House and got a waiver, and we
    got the list.
        Mr. Larsen. Well, the White House didn't make the waiver
    decisions, and only 2 percent of----
        Mr. Scalise. Well, again, I call it crony capitalism
    because it was a lot of the people who supported the law found
    out about it. Now, you say it was advertised.
        Mr. Larsen. It was.
        Mr. Scalise. Most small businesses never heard about it, so
    you didn't do a good enough job of advertising or maybe you
    only advertised to people who supported the law, but it is
    curious that most people that I talk to that don't like this
    law that are trying to figure out how to comply with it but
    can't, they didn't even know about this waiver program that you
    saw was so well advertised yet so many of the groups that came
    here and said pass the law conveniently found out about the
    waiver program and got it. They got a waiver from a program
    that they said we needed. They got the waiver. And the
    companies who didn't want it can't get the waiver and now you
    have ended the waiver program. Can a company that didn't know
    about the waiver program that now knows about it, can they
    apply for a waiver?
        Mr. Larsen. No, but I can say that small businesses were a
    very large percentage of the people that----
        Mr. Scalise. So the companies, and I have seen a long list
    of Fortune 500 companies that got the waivers too, but, you
    know, AARP, groups that supported this law, got the waiver but
    these small businesses I talk to, they never knew it existed.
    They would love to get the waiver now and you are telling me
    under oath that they can't get it today.
        Mr. Larsen. That is right.
        Mr. Scalise. So the other companies that got the waiver,
    are you going to take the waiver away from them or are you
    going to let them keep it?
        Mr. Larsen. No, they got notice, they applied, they met the
    criteria.
        Mr. Scalise. So they get to keep it. The guys that knew
    about it, friends that helped pass the law----
        Ms. DeGette. Mr. Chairman.
        Mr. Scalise [continuing]. Get to keep the waiver from it.
    They don't have to comply with it, and the folks that----
        Mr. Larsen. Well, as I said, the GAO looked at the way we
    ran the process and found----
        Ms. DeGette. Excuse me, Mr. Chairman.
        Mr. Scalise [continuing]. Crony capitalism. I yield back
    the balance of my time.
        Mr. Stearns. The gentleman yields back the balance of his
    time.
        Ms. DeGette. I would just make an observation, which is, if
    members would actually like the witness to answer questions, I
    would suggest they would stop badgering----
        Mr. Scalise. It is not badgering.
        Ms. DeGette [continuing]. And give them the time to answer
    the question.
        Mr. Scalise. We recognize the gentleman from Michigan. Mr.
    Dingell, you are recognized for 5 minutes. Take the floor. You
    are on.
        Mr. Dingell. Coming to the waiver question, I would like a
    yes or no. At the time of this hearing, waivers have been
    granted to over 90 percent of the applicants. The average wait
    time for a decision is 13 days, and union health plans are less
    likely to receive waivers than non-union plans were. Isn't that
    true?
        Mr. Larsen. That is true.
        Mr. Dingell. Now, some other yes or no questions. As you
    know, the Affordable Care Act provides $40 billion in tax
    credits for small businesses so that they may offer health
    insurance to their workers. I believe that it is true that in
    2011, 360,000 small employers took advantage of the small
    business tax credit, providing insurance for better than 2
    million employees. Yes or no?
        Mr. Larsen. I think that is right, yes.
        Mr. Dingell. It is true that since the implementation of
    the Affordable Care Act, that Medicare Part B deductible has
    gone down for the first time in Medicare history? Yes or no.
        Mr. Larsen. Yes.
        Mr. Dingell. Is it true that over 2 million additional
    young adults are now insured because ACA allows them to stay on
    their parents' plans until they are 26? Yes or no.
        Mr. Larsen. Yes.
        Mr. Dingell. Prior to ACA, many people faced lifetime
    limits on health insurance. These limits had potential to
    financially cripple people if they faced a chronic disease or
    severe illness such as cancer. These limits would also force
    them to make decisions to compromise the quality of health
    care. Isn't it true that since the implementation of ACA in
    2010, 105 million Americans no longer face lifetime limits on
    their insurance?
        Mr. Larsen. Yes.
        Mr. Dingell. Is it true that once the Affordable Care Act
    is fully implemented in 2014, 20 million more Americans who
    still lack coverage will become insured? Yes or no.
        Mr. Larsen. Yes.
        Mr. Dingell. Is it true that CCIIO's implementation of the
    Transitional Preexisting Condition Insurance Plan led to health
    coverage for tens of thousands of previously uninsured
    Americans?
        Mr. Larsen. Yes.
        Mr. Dingell. Is it true that CCIIO is moving now towards
    full implementation of the Affordable Care Act in 2014 by
    working with States to make sure that the health insurance
    exchanges required by ACA are designed properly to meet the
    needs of each of the individual States?
        Mr. Larsen. Yes, sir.
        Mr. Dingell. Finally, as we move toward the future, I am
    very much concerned about the Americans who will lose coverage
    if my colleagues on the other side are successful in repealing
    this bill. Am I correct in saying that 33 million Americans
    will lose insurance if my colleagues on the other side of the
    aisle repeal ACA?
        Mr. Larsen. Yes.
        Mr. Dingell. Now, wouldn't such an increase in the number
    of our uninsured in this country increase costs to the health
    care system?
        Mr. Larsen. Yes.
        Mr. Dingell. Now, isn't it a fact that the ACA has in fact
    reduced the deficit?
        Mr. Larsen. It is projected to reduce the deficit.
        Mr. Dingell. All right. Now, isn't it a fact that in 2008,
    people without insurance did not pay for 63 percent of their
    health care cost?
        Mr. Larsen. I think that is right.
        Mr. Dingell. All right. Now, when President Obama was
    elected, he quickly recognized the inescapable truth: an
    individual mandate was essential to make the plan work. Without
    that, the larger pool of premium payers, there is no feasible
    way to require insurance companies to cover all applicants and
    charge the same amount regardless of the health status of the
    beneficiaries?
        Mr. Larsen. Individual responsibility is an important part
    of the matrix.
        Mr. Dingell. Now, I believe this is an overwhelming truth:
    Those with insurance now are supporting those who do not have
    insurance, and they are winding up paying much of the bill for
    those who do not have insurance and that those people are
    running up health costs of about $116 billion annually.
        Mr. Larsen. That is right.
        Mr. Dingell. And so this means that the families and
    persons with insurance are now paying more than $1,000 a year
    for those who do not have health insurance?
        Mr. Larsen. That is right.
        Mr. Dingell. Now, the function of insurance is to spread
    the risk. Previous to the time ACA was passed, we found the
    insurance companies had to avoid the risk and so now we have a
    broad pool which covers everybody. Isn't that right?
        Mr. Larsen. That is right.
        Mr. Dingell. And that makes it possible for insurance
    companies to do the things that are mandated in the ACA. Isn't
    that right?
        Mr. Larsen. Right.
        Mr. Dingell. And without that, we are going to go back to
    the dismal days when we were not able to take care of our
    people, see to it that young people stayed on their parents'
    policies and we won't be able to see to it that preexisting
    conditions are dealt with without cost and charge to people?
        Mr. Larsen. That is right.
        Mr. Dingell. Thank you, Mr. Chairman.
        Mr. Stearns. I thank the gentleman.
        Mr. Griffith is recognized for 5 minutes.
        Mr. Griffith. Thank you, Mr. Chairman.
        Our staff is going to hand you some excerpts from the
    February 17, 2012, Early Retirement Reinsurance Program update.
    This is a list of those who received money from the program.
    Now, I will give you a second to take a look at that as well.
    But before I get to that, as I understand your testimony, the
    Early Retirement Reinsurance Program has spent $4.73 billion of
    the $5 billion allocated. Is that correct?
        Mr. Larsen. That is correct.
        Mr. Griffith. Now, that number appeared in that February
    17th report and in your testimony today but surely there has
    been some of the small amount left spent in that last month. Is
    that not true?
        Mr. Larsen. Well, there will be, because as we go through
    and make sure that all the claims have been submitted
    appropriately, it may turn out that we have the money----
        Mr. Griffith. But at this point it is certain that $4.73
    billion of the $5 billion has already been spent?
        Mr. Larsen. We are effectively at the end of the program.
    There will be some continued claims.
        Mr. Griffith. But wasn't the program supposed to go through
    2014?
        Mr. Larsen. I think it was originally intended to go
    through 2014 but many sponsors took advantage of the program,
    which I think reflects the outstanding need for the program.
        Mr. Griffith. Can you take a quick look at that material
    that was handed to you?
        Mr. Larsen. Is there anything in particular you want to me
    to--the highlighted ones?
        Mr. Griffith. Well, I am getting ready to ask you about all
    those companies that are highlighted.
        Mr. Larsen. OK.
        Mr. Griffith. Could you provide me a yes or no answer to
    the following, and I am going to ask you, of the companies I am
    going to name off, if they received money from the Early
    Retiree Reinsurance Program, and I think the ones that you have
    got that I am going to ask you about are highlighted so you can
    see them easily. ConocoPhillips?
        Mr. Larsen. It looks like they did, yes.
        Mr. Griffith. General Electric?
        Mr. Larsen. They are listed here as well.
        Mr. Griffith. General Motors?
        Mr. Larsen. They are listed on the sheet that you have
    given me.
        Mr. Griffith. Bank of America?
        Mr. Larsen. They are here.
        Mr. Griffith. Ford Motor Company?
        Mr. Larsen. I see Ford Motor Company.
        Mr. Griffith. Hewlett Packard Company?
        Mr. Larsen. That is here.
        Mr. Griffith. AT&T?
        Mr. Larsen. Yes.
        Mr. Griffith. J.P. Morgan?
        Mr. Larsen. Yes.
        Mr. Griffith. Citigroup?
        Mr. Larsen. Yes.
        Mr. Griffith. Verizon?
        Mr. Larsen. Yes.
        Mr. Griffith. AIG?
        Mr. Larsen. Yes.
        Mr. Griffith. IBM?
        Mr. Larsen. Yes.
        Mr. Griffith. Now, what we just went over is a list of
    companies that are not just in the Fortune 500 but that receive
    this taxpayer money but are companies that are in the top 20.
    Twelve of the top 20 of the Fortune 500 received money from
    this program. And I think you told us in a previous hearing
    that that is because the underlying law didn't make a
    distinction for those that needed the money, it was just out
    there if you met the criteria.
        Mr. Larsen. The law was based on the fact that
    historically, the number of companies that are able to provide
    retiree coverage has dropped off, I think by half in the last
    10 years. So it was not needs-based. And I think as you
    probably saw, many of the biggest recipients of the funds were
    in fact State retiree programs, State teachers, State
    employees.
        Mr. Griffith. One of my concerns, though, is that if the
    intent of the bill was to give this early retirement assistance
    to companies so that they could fund their programs, I think we
    have the same problem Mr. Scalise pointed out. A lot of the big
    companies got in, the rich folks got it because they had people
    to monitor all this stuff and keep track of it. I am not sure
    that the small companies that probably needed the assistance
    got it. Wouldn't you say that is a fair assessment?
        Mr. Larsen. I don't think so. We have had, I think, over
    2,800 sponsors of a wide range of size and background come to
    get money from this program. Remember, it has to be companies
    that are already providing benefits to their retirees, so that
    is, you know, typically going to be some larger companies,
    although, as I said, it is frequently States and their State
    employee retirement systems that got the money as well as some
    of the companies you mentioned here.
        Mr. Griffith. Now, you said in testimony--and I am
    switching gears on you. You said in testimony earlier that this
    would not necessarily be enforced, the act would not be
    enforced by your agency but by the IRS because it was----
        Mr. Larsen. Getting back to the individual responsibility
    provision?
        Mr. Griffith. Yes. And that would be enforced by the IRS.
    Is that the 16,000 new IRS agents we have heard so much about?
        Mr. Larsen. I don't believe so. I don't think that it is
    how it enforced. It will be enforced electronically through the
    filing and through the verification of whether someone has
    purchased insurance. And that doesn't occur until 2015 because
    that is when the responsibility provisions actually kick in to
    confirm that someone had coverage in 2014.
        Mr. Griffith. All right. My time is just about up but I
    want to ask you about CBO said it going to cost more than the
    trillion that we were originally told it was going to cost when
    this passed before I got here, and it looks like, is it fair to
    say that based on that information over the 10 years that this
    may actually cost $2 trillion or more?
        Mr. Larsen. Actually, the CBO report found that there would
    be about 50 billion fewer costs associated with implementing
    this because of the number of changes that they highlighted, so
    the numbers in the CBO report that just came out said that over
    the 10-year period from 2012 to 2021 would be $49 billion or
    $50 billion less than what they had projected a year ago in
    March of 2011.
        Mr. Griffith. But it is going to be more for the first 10
    years. Isn't that correct? Isn't that what CBO said?
        Mr. Larsen. No.
        Mr. Griffith. All right. I yield back, Mr. Chairman.
        Mr. Stearns. The gentlelady, Ms. Christensen, is recognized
    for 5 minutes.
        Mrs. Christensen. Thank you, Mr. Chairman. And Mr.
    Chairman, before I ask my question, I just wanted to make some
    comments about the Early Retiree Reinsurance Program because
    the attacks on it are really unfair and unjustified.
        Prior to the passage of the Affordable Care Act, employers
    were dropping coverage for their retirees at an alarming rate
    or finding themselves saddled with huge and rapidly increasing
    health care costs. The program was an effort to help employers
    bridge the transition to 2014 when more affordable coverage
    options will be available, and in the face of overwhelming
    need, the ERRP program had great results. The program has
    helped more than 2,800 employee health plans sponsors across
    the country cover the cost of medical care for early retirees.
    These plans cover more than 19 million beneficiaries. ERRP
    funds support employers that continue to provide private health
    coverage and help early retirees keep the private coverage they
    already have. This important transitional program worked to
    support employers making the right choice for their retirees,
    and I think it is an important way to support that choice.
        Mr. Larsen, let me ask you some questions about the
    Preexisting Condition Insurance Plan. You testified before the
    subcommittee on April 1st to discuss the Preexisting Condition
    Insurance Plans, the PCIP, or high-risk pools established under
    the Affordable Care Act. In that hearing, we heard about
    thousands of Americans with preexisting conditions who finally
    had access to coverage, and we established that maybe somewhere
    around 50,000 Americans have enrolled in the PCIP. And I
    understand that many of these individuals have serious health
    conditions including 1,900 individuals with cancer, nearly
    4,700 with heart disease. What type of coverage options did
    these individual with preexisting conditions have before we
    passed the Affordable Care Act?
        Mr. Larsen. Well, the fact is that they really wouldn't
    have any other coverage options. I think many of these people
    would be diagnosed with cancer and end up in the emergency room
    or not get care at all for their condition.
        Mrs. Christensen. And how will those options improve in
    2014?
        Mr. Larsen. Well, when the insurance reforms kick in, at
    that point we will have guaranteed issue, guaranteed
    renewability and so we will have a much larger insurance pool
    and people that would get locked out of the system today by the
    insurance companies won't be locked out in the future, but we
    will also have many, many more people in the insurance pool to
    offset those costs.
        Mrs. Christensen. Thank you. The only complaint I have
    about that program is that it didn't extend to the territories,
    Mr. Larsen. Still working on that.
        But, you know, Republicans should love the PCIP program. It
    has been the centerpiece of their past reform proposals, but
    instead they attack it because they say it is not popular
    enough unless of course they are attacking it for the opposite
    reason, that it is too popular and may spend too much money. So
    Mr. Larsen, what happens if the program becomes so popular that
    the expenditures might exceed $5 billion?
        Mr. Larsen. Well, we have to manage within the amount that
    Congress has appropriated for this so we continue to monitor
    the progress that States are making in their enrollment and
    their costs, and if we have to make adjustments in the future,
    we will do so.
        Mrs. Christensen. Are there procedures in place to make
    sure that they don't exceed the program costs?
        Mr. Larsen. We have to make sure that we don't exceed
    program costs.
        Mrs. Christensen. And what happens if you do not spend the
    entire $5 billion?
        Mr. Larsen. That is a good--I don't know the exact answer
    to that but I will say that if we exceed our costs, then there
    are a number of different options that we can pursue to make
    sure that we stay within the $5 billion.
        Mrs. Christensen. OK. So we have a win-win scenario here.
    In one case, the program becomes extremely popular, many people
    receive coverage and you still have processes in place to
    protect taxpayers and to make sure expenditures do not exceed
    authorized amounts. The other scenario involves low enrollment.
    In that case, I think what happens is you will return the extra
    money to the Treasury, which would help reduce the national
    debt. So I appreciate your walking us how the money is being
    spent.
        I know that there are many unfair attacks against the
    health reform law, the Patient Protection and Affordable Care
    Act, but I think the record is clear that you are administering
    the PCIP program and the law as a whole in a very effective and
    efficient fashion, and it is a humongous task, so we really
    commend CCIIO and the entire department for the way that you
    are doing it. And I do have some specific territory-related
    questions that I will submit for the record.
        Mr. Larsen. OK. We will look forward to answering those.
        Mrs. Christensen. Thank you, Mr. Chairman.
        Mr. Terry [presiding]. Thank you. Now the Chair recognizes
    the gentlelady from Tennessee for her 5 minutes.
        Mrs. Blackburn. Thank you, Mr. Chairman, and Mr. Larsen, we
    are pleased that you are back with us today.
        I want to talk about the nonprofits. You said that you had
    awarded more than $638 million in loans already from the
    consumer operated and oriented plan, but OMB has estimated that
    under the co-op program, that taxpayers could lose $370 million
    from unpaid loans to the nonprofit insurers. Do you think that
    is accurate? Are we missing something here? Are they missing
    something?
        Mr. Larsen. Well, I guess for purposes of the loan program,
    OMB has to make some type of projection as they would for any
    loan program about the rate at which recipients would not repay
    their loans. I can tell you that in our review process for the
    applicants that we got, we hired an outside consultant with
    extensive financial expertise to look at the applications that
    we got. So OMB has to make some assumptions, I guess, for
    purposes of releasing the money. But we are running a very
    vigorous process and we----
        Mrs. Blackburn. So basically you are saying this is a bad
    investment for the taxpayer?
        Mr. Larsen. Not at all, no.
        Mrs. Blackburn. You are not saying that?
        Mr. Larsen. I am not saying that.
        Mrs. Blackburn. You are saying the taxpayer should expect
    to lose money because $370 million----
        Mr. Larsen. No, I am not. I am saying the opposite.
        Mrs. Blackburn [continuing]. Is a health care Solyndra.
    Well, you just told me that you thought OMB has to expect a
    certain amount of this, and, you know, if they are saying as
    much as 50 percent of the loans issued under the program may
    not be repaid, I mean, do you think that is accurate?
        Mr. Larsen. Well, we don't think there is going to be a
    default rate on these loans. I think they have to make
    projections for certain purposes, but again, I can tell you
    from our perspective, we are doing everything we can to make
    sure that we only provide the loans to----
        Mrs. Blackburn. Then let me approach it this way with you
    because reading this is of concern to me, and after what this
    committee has been through looking at the DOE loan program and
    the bankruptcies that are there, let us kind of agree to get
    out ahead of this, and what I would love for you to do is to
    submit the analysis and the documents related to the program
    and then your approval of or rejection of the loans. I think as
    we oversee this, that that would be very helpful to do that.
    Would you submit that to us for the record?
        Mr. Larsen. Yes, assuming that we can provide that
    application material, but I would be happy to kind of explain
    for you exactly what process we ran to make sure that we got
    the best applicants.
        Mrs. Blackburn. That would be great. I have got just a
    little bit of time left, and I do have another question for
    you. Last time you were with us and we discussed the waivers, I
    asked if you had a plan B for when the waivers ran out, and you
    did not have a plan B, and now we are looking at is, what is
    it, 1,800 waivers that have been given, as you look at your
    cost in the coming years and you look at 2014 when these
    waivers--have you come up with a plan B for how you are going
    to integrate these programs and what the expectations are going
    to be for the impact on the system?
        Mr. Larsen. Well, essentially the plan B or the transition
    is that in 2014, when the requirements of the annual limits
    provisions would apply, these mini-med policies would no longer
    be offered because employees would have access to full,
    comprehensive coverage. Many of them would be able to access
    the tax credits that are available because it is often lower
    income workers that are in these mini-med plans and those are
    exactly the kinds of people----
        Mrs. Blackburn. OK. Let me ask you this----
        Mr. Larsen [continuing]. Who would have access to the tax
    credit in 2014.
        Mrs. Blackburn. OK. All right. As you have gone through the
    waiver program, how many people were denied waivers? How many
    companies were denied waivers?
        Mr. Larsen. It was a very--we approved over 90 percent. I
    think it was only, 90 or 100 that were denied.
        Mrs. Blackburn. OK. And the waiver program is closed. You
    can no longer get a waiver?
        Mr. Larsen. That is right.
        Mrs. Blackburn. All right. The ones that were denied, what
    was the reason for the denial to them?
        Mr. Larsen. Well, to be approved for the waiver program,
    you had to show that applying the high annual limits, at the
    time, $750,000 annual limits, to your policy would result in a
    substantial increase in premiums or a decrease in access to
    coverage. So for policies that had coverage of $25,000 or
    $5,000, which are these mini-med policies, typically applying
    that standard, it would raise premiums. Some people might not
    be able to afford them. So that is how you were approved for a
    waiver. If you weren't approved for a waiver, it meant that you
    didn't meet the regulatory criteria. In other words, it wasn't
    going to cause a large increase in premiums to comply with the
    annual limits provisions that were in place at the time.
        Mrs. Blackburn. All right. Yield back.
        Mr. Terry. I thank the gentlelady from Tennessee.
        Now we recognize the gentleman from Texas, Mr. Green.
        Mr. Green. Thank you, Mr. Chairman, and again, welcome, Mr.
    Larsen.
        I know there are some concerns, and our committee actually
    spent a lot of time on the Affordable Care Act when we were
    marking it up both in our subcommittee and the full committee 2
    years ago, and I have a district that has such a huge impact
    the Affordable Care Act will do. Before the passage, the 29th
    district that I represent had the largest percentage of
    uninsured in any district in our country, a very urban area in
    Houston, again, not a wealthy area. We still have a lot of work
    to do but things are getting better. As many as 53,000 children
    in our district can't lose the security offered by health
    insurance due to preexisting conditions. Thirty-four hundred
    seniors have saved an average of $540 on prescription drugs and
    9,000 young adults have health insurance they couldn't have
    before the Affordable Care Act. Additionally, about 60,000 of
    my constituents, most of them minority and historically
    underserved communities, are receiving an array of preventive
    health services without copays, coinsurance or premiums, and
    this is a result of the Affordable Care Act and its tremendous
    help toward reducing health care disparities in our district
    particularly but in our country.
        I am proud to represent part of Houston. We have a great
    Texas Medical Center there, I think one of the largest in the
    country. It is just hard for my folks to get there except
    through our public hospital system. Individuals in underserved
    communities, minorities, rural areas and communities with high
    poverty rates need the Affordable Care Act, and I would like to
    ask you some questions about how this act is serving the
    underserved areas.
        First, what are some of the biggest barriers to access to
    care for these underserved communities, again, very urban like
    mine or even rural areas?
        Mr. Larsen. One of the main ones is cost for lower-income
    individuals, the cost of coverage and access and coverage, and
    the Affordable Care Act of course addresses that through the
    tax subsidies that are available for people.
        Mr. Green. The health care law provides billions of dollars
    in public health grants for community health center expansion.
    I know we had received some of those grants in our district and
    we need more because Houston in Harris county is the fourth
    largest city in the country and yet we are behind the curve on
    community-based health centers, and I know a few years ago when
    we authorized it, we had a provision in there that if you are a
    very urban area and all being equal, if you had a huge
    underserved population, that your grant application was given a
    higher priority. I know that is helpful, but will the
    Affordable Care Act address some of those barriers, expanding
    and health care providers and community health centers?
        Mr. Larsen. It will, and there are provisions in the
    exchange rule that requires network adequacy to make sure that
    health plans have a full network of providers including
    essential community providers, which are an important part of
    the support for the individuals you are referring to.
        Mr. Green. Can you just verbalize some of the preventative
    health care benefits that we are seeing now on the second year
    anniversary?
        Mr. Larsen. Well, there is a whole range, particularly for
    wellness visits for women, for children, cancer screenings,
    colonoscopy screenings, you know, the things that have been
    approved by IOM that have been shown to be effective in terms
    of prevention.
        Mr. Green. OK. I realize this is not your area but the
    health care reform law also contained funding and new programs
    to help expand the health care workforce, especially primary
    care workforce. Can you give us an update on how that will
    help, not only minorities and underserved but individuals in
    those underserved areas?
        Mr. Larsen. I know that there is substantial funding
    available in HHS for a number of workforce initiatives, which
    is extremely important and it is significant, the details of
    which I don't have in front of me but I know that it is a key
    part of this law.
        Mr. Green. Finally, the Affordable Care Act coverage
    provisions, expansion of Medicaid, new health care credits for
    small businesses and the State insurance exchanges that will
    make health insurance less expensive and easier for
    individuals. I know, for example, in Texas, and a lot of
    States, I think 26 States, are waiting until the Supreme Court
    decides whether they are going to participate, even though my
    home State received planning money for it, they have decided to
    wait. But even if they are waiting, HHS will provide an
    exchange system for those States that do not participate.
        Mr. Larsen. We will. One way or another, there will be an
    exchange for the health care consumers in each State including
    Texas, although many States, even States that are challenging
    the law, actually have applied for and received extensive
    grants and are moving forward to be ready in 2014.
        Mr. Green. And I know in Texas, again, the political
    decision has been made, but hopefully the Supreme Court will
    come back with an argument and realize that health care is just
    like Social Security, like a lot of other things, Farm Bill,
    things like that, that Congress has the right to make that
    mandatory.
        So Mr. Chairman, thank you for your time.
        Mr. Terry. Thank you, Mr. Green.
        The Chair recognizes the gentleman from Pennsylvania, Mr.
    Murphy, for 5 minutes.
        Mr. Murphy. Thank you, Mr. Chairman.
        Mr. Larsen, do we have any numbers yet of what we estimate
    an individual will pay for their premium and copay under new
    insurance plans under the Affordable Care Act?
        Mr. Larsen. I don't have an estimate, and the estimate
    really varies depending on the State and how old they are and
    whether they are buying in the individual and small group
    market.
        Mr. Murphy. Will it be $1,000 a year, do you think?
        Mr. Larsen. I don't know.
        Mr. Murphy. Well, current policies now average what
    nationwide?
        Mr. Larsen. You know, I think the typical estimate is for,
    you know, $12,000 for an individual. I think that is in the
    individual market.
        Mr. Murphy. I understand. Now, with regard to this plan,
    will it be open enrollment year round, a person can sign up for
    an insurance plan?
        Mr. Larsen. Now, there will be open enrollment periods, you
    know. In the reg that we put out, there is an initial open
    enrollment period that is a little longer and then each year
    there will be open enrollment windows.
        Mr. Murphy. And do we have estimates of how much we think
    that coverage under the Affordable Care Act will increase or
    decrease? I know as part of the mandate, everybody is supposed
    to get a policy. There is a belief that somehow that will have
    an impact. But do we know exactly how much it may reduce
    individual costs, keep it the same, increase, slow growth?
        Mr. Larsen. You know, there are a number of different
    estimates. I know CBO did one that said for the small group
    market, it could be flat to advantageous because of the
    economies of scale you get coming in. It somewhat depends in a
    particular State whether they have a full range of benefits
    today or a modest range, and then you get of course the
    efficiencies in the individual market of having everyone in one
    single insurance pool in a State.
        Mr. Murphy. But as far as the States go, there still is a
    required amount of coverage that each plan has to have but some
    States----
        Mr. Larsen. That is the essential health benefits.
        Mr. Murphy. So some States have very few mandates, some
    States have a lot. This will have a set amount that every plan
    has to have?
        Mr. Larsen. Well, one of the things we did in the bulletin
    that we issued was to allow States to select their own
    benchmark for essential health benefits so you are exactly
    right. In some States they have more mandates than other
    States, and that State could select that as their benchmark,
    and the State that has a small, a thinner mandate, benefit
    package, assuming that it kind of met the basic criteria, could
    choose that as their benchmark.
        Mr. Murphy. So we are still not clear on this. Now, we do
    know that if an employer drops coverage, they would pay a
    $2,000 fine?
        Mr. Larsen. There is a penalty, yes, for not offering
    coverage.
        Mr. Murphy. And I have seen estimates all over the place as
    have you. I have seen some as high as 85 million people may not
    be covered. Some say it may be 10 million. It is all over the
    board. Some say 20 million won't be covered by employers. Does
    that sound right, estimates all over the place?
        Mr. Larsen. Well, I would say this. There are many
    different estimates but I think most of the estimates like CBO
    suggest, there could be a small number of people that have it
    today that might not have it then, but then there are many
    other people that don't get it offered today that will have it
    offered in the future. So when you net those things out----
        Mr. Murphy. Big question mark there. I know that is
    estimated about $40 billion a year is lost for uncompensated
    care that hospitals say they need that money, or is it more
    than that? Do you know?
        Mr. Larsen. Right. I mean, that that was one of the
    premises of the act that we all pay for that uncompensated
    care.
        Mr. Murphy. And what they are looking at, so an employer
    may drop coverage and pay a $2,000 fine. As I understand it, an
    individual, if they choose not to have coverage, they will pay,
    I think, a fine of $695 or 2-1/2 percent of their income,
    whatever is higher. Am I correct?
        Mr. Larsen. Right.
        Mr. Murphy. Now, given what people are facing here now,
    there are multiple open enrollment periods during the year, you
    have people also facing increased energy costs with the
    policies where many coal-fired power plants are going to drop,
    we are going to lose about 20 percent of our power generation
    so people's electric bills are estimated to go up 30 to 40
    percent, with gasoline costs going up now where an individual
    this year is paying about $2,500 or $5,000 more a year,
    families are going to continue to make individual choices. So
    although there is a mandate to require people to purchase
    health care, you still can't make them purchase health care. If
    they decide to not purchase it, they can still hold off and not
    purchase it?
        Mr. Larsen. Well, they pay the financial penalty.
        Mr. Murphy. But if they say look, I will pay $695 versus
    several thousand dollars, they may make that decision?
        Mr. Larsen. Some could, although for many lower-income
    individuals, up to 400 percent of poverty, there are the tax
    credits available that significantly offset the cost.
        Mr. Murphy. A tax credit for somebody who is on poverty and
    doesn't pay taxes?
        Mr. Larsen. Well, many of them do. I mean, obviously people
    that are on Medicaid may not but the credits are available for
    people up to 400 percent of poverty.
        Mr. Murphy. I mean, the issue that still baffles me is the
    preventative care issues. I mean, there is still--we know that
    there is decreased cost for people who don't see a doctor.
    There is decreased cost for people who eat healthy foods,
    decreased cost for people who have optimal weight. I think
    obesity costs our health care system $147 billion a year.
    Decreased costs for people who exercise regularly, follow their
    prescriptions carefully. I think misusing prescriptions is a
    $250 billion drain a year. People who are chronically ill, if
    you monitor them, work with them on health, there can be a 40
    percent cost savings. If this is the where all the costs are,
    will we be mandating those things in order to really save?
    Because those things add up to be several hundred billion
    dollars a year. Will we be mandating these behavior changes
    too?
        Mr. Larsen. Well, not behavior changes certainly but there
    are a lot of incentives in the Affordable Care Act for health
    and wellness programs for insurance companies who will get a
    credit on their medical loss ratio calculation if they provide
    health and wellness programs.
        Mr. Murphy. So you are believing that the financial
    incentives to help people drive to behavior changes on this
    versus mandating them?
        Mr. Larsen. I think in this case, yes, for the health and
    wellness.
        Mr. Murphy. Thank you.
        Mr. Stearns. The gentleman's time has expired. I think we
    are ready, I would say to my ranking member, we will go a
    second round to Mr. Larsen, and I will start with this, and I
    tell members who would like to stay a second round, stick
    around.
        Let me just start by sort of asking you, Mr. Larsen, a sort
    of general question. We have heard from Mr. Waxman and others
    how the cost of health care is going to come down. Do you
    actually believe that the cost of health care in America will
    come down? Is that what you are saying to us today, that
    Obamacare will cause the cost of health care to come down?
        Mr. Larsen. Well, many aspects of the ACA will lower health
    care costs, first by getting more people----
        Mr. Stearns. I understand, but has it lowered premiums so
    far? I mean, this bill has been enacted 2 years. Have you seen
    the premiums come down, in your opinion?
        Mr. Larsen. The provisions that help address the----
        Mr. Stearns. I mean yes or no.
        Mr. Larsen [continuing]. Insurance premiums don't take
    effect until 2014.
        Mr. Stearns. So you say it is too early to see the impact
    of Obamacare?
        Mr. Larsen. Well, with respect to premiums. I mean, we have
    expanded coverage, we have provided people with better
    coverage. The provisions that help address some of the cost
    efficiencies with the exchanges don't----
        Mr. Stearns. But the fact is, health insurance premiums
    have shot up 9 percent, three times the rate of inflation. This
    is according to the Kaiser Family Foundation. And I think you
    would agree that the Kaiser Family Foundation said the costs
    have gone up 9 percent, 3 percent above inflation. Wouldn't
    that indicate that a lot of the things that you have talked
    about that have been implemented have really not brought costs
    down?
        Mr. Larsen. Well, first of all, that rate of increase has
    been consistent over the last 10 years, which is why we need--
    --
        Mr. Stearns. So the fact is, it has not changed with
    Obamacare.
        Mr. Larsen. Well, in fact, I think the CBO in their recent
    report found that the rate of health care spending and premiums
    had actually moderated in the last year when they looked at the
    estimates for the costs----
        Mr. Stearns. Don't you think that is probably the economy
    more than anything?
        Mr. Larsen. Well, it could be a number of factors. I guess
    what I am saying is, that we don't think the provisions of the
    ACA are what is at work when you look at the historical rate of
    increase of premiums year over year. The ACA will help fix
    those provisions.
        Mr. Stearns. So Mr. Larsen, you are saying today, we can
    expect health care costs for families to go down?
        Mr. Larsen. We hope and expect that costs will moderate
    with the provisions of the ACA.
        Mr. Stearns. Now, the President promised lower premiums by
    an average of $2,500 per family. Do you think this is going to
    happen?
        Mr. Larsen. I think costs will be much lower compared to
    what they would have been if the ACA hadn't been enacted.
        Mr. Stearns. Your testimony talked about the rate review on
    insurance increases in New Mexico, Connecticut, Oregon, New
    York and Rhode Island, correct?
        Mr. Larsen. That is right.
        Mr. Stearns. In any of these situations, did the premiums
    go down?
        Mr. Larsen. I think in the examples we cited, that the
    insurance commissioner in that State worked to lower the
    initial rate filings that came in.
        Mr. Stearns. Well, I think your testimony indicated that
    the rate review situation resulted in premiums going up. The
    government really said they couldn't go up so much but I think
    that is true.
        Mr. Larsen. Oh, I see. You mean their increases were
    approved but they were lower than what originally was filed by
    the insurance company?
        Mr. Stearns. Yes.
        Mr. Larsen. Right.
        Mr. Stearns. Where in your testimony do you discuss
    lowering premiums?
        Mr. Larsen. Well, lowering--it is all relative, right? I
    mean, lowering premiums means lower than what they would have
    been if we hadn't had these types of provisions.
        Mr. Stearns. That is like we do in Congress. We say we
    reduce spending by lowering the spending more than we
    projected.
        The example you cite, you say that ``The Government
    Accountability Office found that in a survey of seven insurers,
    most of the insurers were adjusting premiums.'' Is that it?
        Mr. Larsen. Well, that was a result of the medical loss
    ratio provisions. GAO did a very limited survey of a number of
    companies to see whether they were taking action to comply with
    the MLR and what it is, and in some cases, companies were
    moderating their premium increases. We did have an example, and
    there may be others, of a company that actually lowered
    premiums. There is a case----
        Mr. Stearns. Can you give me a specific example?
        Mr. Larsen. Aetna Insurance Company in Connecticut actually
    lowered premiums.
        Mr. Stearns. OK. So is that the only one, Aetna of
    Connecticut?
        Mr. Larsen. Well, that is the one that I am aware of.
        Mr. Stearns. Can you name anyone else that has lowered
    premiums specifically because of Obamacare?
        Mr. Larsen. Well, when you say lowered, you mean moderated
    the premium increases that would occur?
        Mr. Stearns. To use your term----
        Mr. Larsen. I can find that and get it to you in writing
    because, yes, many companies have been on the record both with
    us and in Wall Street indicating that they were moderating
    their rate increases based on the MLR provisions in the
    Affordable Care Act.
        Mr. Stearns. Do you provide waivers if companies find out
    that their premiums are going up significantly? Is that one of
    the factors which you provide a waiver for?
        Mr. Larsen. Well, in the waiver program that we don't
    operate anymore, but at the time, that was one of the criteria,
    that is right.
        Mr. Stearns. Mr. Scalise talked about, I don't know, 1,200,
    1,400, I think there is 1,700 entities that got waivers. Isn't
    that true?
        Mr. Larsen. Overall, though that included about 400 or 500
    companies that offered HRAs, or health reimbursement accounts,
    that we really concluded didn't need a waiver under the law.
        Mr. Stearns. All right. My time is expired. Mr. Dingell is
    recognized for 5 minutes.
        Mr. Dingell. Thank you, Mr. Chairman. You have, first of
    all, Mr. Larsen, given us a very good statement today, and Mr.
    Chairman, I think that the information that we got in this
    hearing has been most helpful in understanding how we are doing
    and moving forward, and also in having some significant
    appreciation of the chores which yet remain. I think if we all
    are willing to work together, we are going to see this program
    be a good one of which we will all be proud.
        Mr. Larsen, you made some points here. In your statement,
    you said States are already using this authority to save money
    for families and small business. Starting out in New Mexico,
    the State insurance division denied a request from Presbyterian
    Health Care for a 9 percent rate hike, lowering it to 4.7
    percent. In Connecticut, the State stopped Anthem Blue Cross
    Blue Shield, the State's largest insurer, from hiking rates by
    a proposed 9 percent, instead limiting to a 3.9 percent
    increase. In Oregon, the State denied a proposed 22 percent
    rate hike by Regency, limiting it to 12.8 percent. In New York,
    the State denied increases for Emblem, Oxford and Aetna that
    averaged 12.7 percent, holding it instead to an 8.2 percent
    increase. In Rhode Island, the State denied rate hikes to
    United Health Care of New England ranging from 18 to 21
    percent, instead seeing them cut to 9.6 to 10.6 percent. I know
    what you are telling us, that these provisions are working in
    terms of assuring the protection of consumers. Is that a fair
    statement?
        Mr. Larsen. Yes, sir.
        Mr. Dingell. Now, we have talked a little bit about the
    health insurance exchanges. You will note that as you have
    indicated, CCIIO is charged with helping States set up these
    exchanges. Isn't that right?
        Mr. Larsen. Yes.
        Mr. Dingell. How will these exchanges change consumers'
    experience in purchasing health insurance on the individual
    market?
        Mr. Larsen. Well, individuals will now have access to a
    competitive market, an affordable market.
        Mr. Dingell. Will he know what he is getting?
        Mr. Larsen. They will know what they are getting, and they
    will get comprehensive coverage and they will have the ability
    to get tax credits if they meet the criteria.
        Mr. Dingell. They will be written in a simple,
    understandable way?
        Mr. Larsen. Yes.
        Mr. Dingell. So that the purchaser of the insurance policy
    will be able to understand what he is buying and what the
    advantages of the different plans might happen to be. Is that
    right?
        Mr. Larsen. Exactly.
        Mr. Dingell. And you don't need to be a Philadelphia lawyer
    to understand this. Is that right?
        Mr. Larsen. That is right.
        Mr. Dingell. So in addition to improving the market for
    individual coverage, then we must assume that the exchanges
    will also provide for small businesses to have for the first
    time ever the ability to pool their risk and buying power
    together to drive down costs. Is that right?
        Mr. Larsen. That is right.
        Mr. Dingell. Now, there seems to be some misunderstanding
    here. Insurance companies over the years have been forced to go
    to the idea that they will avoid the risk because they didn't
    have a decent insurance pool, so what they did is, they
    curtailed the size of the pool by getting rid of the most risky
    people, and that is why they used preexisting conditions and
    other things to prevent certain classes of people from buying
    insurance. Is that right?
        Mr. Larsen. That is right.
        Mr. Dingell. So now the insurance companies are going to be
    able to engage in the practice that is so important in terms of
    having real insurance. They will cover everybody.
        Mr. Larsen. That is correct.
        Mr. Dingell. And this is going to enable insurance
    companies to then practice insurance in the classical sense by
    making it available to all persons and then we will all share
    the risk that flows from the possibility of sickness or illness
    or debilitation. Is that right?
        Mr. Larsen. That is correct.
        Mr. Dingell. And this is one of the main ways in which we
    are going to see significant savings of monies to the Federal
    Government, to the employers and to of course the purchasers of
    the insurance. Is that right?
        Mr. Larsen. That is right.
        Mr. Dingell. Mr. Chairman, I am going to surprise you. It
    is 38 seconds I yield back.
        Mr. Stearns. All right. Thank you, Mr. Dingell.
        Dr. Burgess is recognized for 5 minutes in our second
    round.
        Mr. Burgess. Thank you, Mr. Chairman. I am tempted to
    actually go to the left of John Dingell but I am going to
    resist the temptation.
        He was talking about--and we do this all the time--the
    ERISA market is not the same as the small group market and the
    individual market. Mr. Dingell's questions really were about
    the small group market and the individual market, not the
    employer-sponsored insurance market, because preexisting
    conditions are covered then in the open enrollment, are they
    not?
        Mr. Larsen. You mean for the self-insured market?
        Mr. Burgess. No, no, I am talking about for someone who
    works for, say, a big telecom company that is known only by
    its----
        Mr. Larsen. Yes, that is one of the big advantages of
    working for a large company.
        Mr. Burgess. Right. Those individuals in the large group
    market were not subject to the same constraints that Mr.
    Dingell was just discussing. Is that correct?
        Mr. Larsen. Typically that is right, yes.
        Mr. Burgess. And it really seems like had we wanted to
    reform the system, we would have tried to help the individual
    market and the small group market behave more like the large
    group market, and I think we could have gotten a lot more bang
    for the buck, but that is another story. We didn't get to do
    it. Am I going to be able to keep my HSA?
        Mr. Larsen. There is nothing in the Affordable Care Act----
        Mr. Burgess. There is not? What about the medical loss
    ratio? Are you going to count the amount of money that I
    contribute to my health savings account as a medical expense or
    is that administrative expense?
        Mr. Larsen. Well, at this point I don't think it counts in
    the MLR provisions but we are looking at HSAs and HRAs in
    connection with----
        Mr. Burgess. Can you guarantee me that I will be able to
    keep my HSA when this thing is fully implemented?
        Mr. Larsen. I don't see any reason why you couldn't keep
    your HSA.
        Mr. Burgess. Well, I will tell you, my read of it is that
    there is a risk, and if we really want to control costs without
    rationing, and I do, because I don't like rationing, but if we
    really want to control costs, we will leave the health care
    consumer, the patient, in charge of a lot of the decisions and
    the money of their expenditures because I know from my own
    experience, I am a much more cost-conscious shopper in health
    care because it is my money that I am spending, that money
    being designated from my health savings account. President
    Obama himself, and he is from the White House, told us this
    last year when he had all us down there to talk to us about the
    debt limit, he referenced how expensive health care was, and he
    said he got a rash on his back, he put some cream on it and
    there was a $5 copay but he was out on the campaign trail, he
    didn't have his card, and he went to the pharmacist to explain
    his predicament. The pharmacist got the prescription
    transferred--thank you, electronic health records--but when the
    prescription was handed up to him, he was told that it would be
    $400, and the President said you know, this rash is not that
    bad. And exactly right, Mr. President. You became an informed
    health care consumer. So the power of putting--putting this
    power in the hands of the consumer really can be a powerful
    incentive to hold costs down, and the only other thing you have
    got, the only other lever you can pull is you say we are going
    to have waiting lists or rationing, or we are going to cut
    reimbursements to physicians. We saw what happened in Medicare
    with the SGR. You cut my reimbursement. My fixed costs remain
    the same, so what do I do? I do my stuff so I cost you more
    money because I have still got to pay the same bills that I had
    to pay before. So I really think getting away from an HSA-type
    model, especially for people who are in the immediate pre-
    Medicare years, that is going to be a big mistake and it is
    going to drive costs up, not the other way around.
        Now, having been in practice and having seen what happened
    when an insurance company went bankrupt and seeing the effect
    on patients and the people who are supposed to be paid by all
    those claims that didn't get paid and yes, there was a small
    State fund that we could go to but nowhere near covered the
    expenses, are you concerned at all that when a company comes to
    you and says we need to raise our rate and it is based on
    actuarial evidence, are you concerned at all when you hold
    these rates down that you may be driving companies toward
    insolvency, maybe not tomorrow, maybe not next year, but over
    time?
        Mr. Larsen. Well, first of all, HHS, when we review rates
    in the small number of States that we do it, we don't have the
    ability or the authority under the ACA to actually force the
    company to do anything different. We make a conclusion and the
    company can proceed if they want to with the rate, and
    certainly in the States that do have the authority to modify
    rates, it is something that they--and I did this as well--you
    need to take into account when you are looking at their----
        Mr. Burgess. Wait a minute. I thought under the Affordable
    Care Act rates are going to go down because you are going to
    prevent large increases from the insurance companies? Did I not
    hear that said several times this morning?
        Mr. Larsen. And I think the evidence shows that that is
    happening. I think all I am saying is that when regulators look
    at the rates, they have to make sure they are reasonable and
    not excessive, and you are absolutely right. They have to make
    sure they are not inadequate as well and that companies----
        Mr. Burgess. So a recent news story----
        Mr. Larsen [continuing]. And that companies have enough
    revenue.
        Mr. Burgess [continuing]. Said rates went up 26 percent in
    Alaska, 23 percent in Florida, 20 percent in Washington State,
    all since the implementation of the Affordable Care Act. Is
    that going to be modified in the future? Are those rates are
    going to be going up less because of the Affordable Care Act?
        Mr. Larsen. I am not sure what you are citing there.
        Mr. Burgess. Well, there was an article in the general
    news.
        Mr. Chairman, I will yield back at this point, but I am
    going to submit that question with more detail, and I would
    appreciate a thoughtful answer to that.
        Mr. Larsen. OK.
        Mr. Stearns. All right. The gentleman's time is expired.
        The gentleman from Virginia is recognized for 5 minutes.
        Mr. Griffith. Thank you, Mr. Chairman.
        Let us talk about medical loss ratio rebates. Your
    testimony states ``Consumers will receive a notice explaining
    their carrier's medical loss ratio, MLR, if their carrier owes
    them a rebate on their premium payments.'' Now, as I understand
    it, this is to be issued in August of 2012. Is that correct?
        Mr. Larsen. That is right. If rebates are repaid, they
    would come out--they are supposed to be done by August.
        Mr. Griffith. By August of 2012?
        Mr. Larsen. Um-hum.
        Mr. Griffith. And the law requires the companies to send
    these notices out, or the rebates out?
        Mr. Larsen. Yes. I mean, we proposed in our regulations
    that when an individual gets a rebate, that they would get a
    notice from their insurance company describing what it is they
    are getting and whether their company complied with the law and
    what the MLR was.
        Mr. Griffith. Let me ask you this question. Does the
    carrier have to send all of their customers a letter whether or
    not they get a rebate or only if they get a rebate?
        Mr. Larsen. Well, two things. One, in the rule that's on
    the books now, we from the beginning had made it clear that
    when there is a rebate to be provided, yes, the consumer would
    get a notice. We did propose for consideration and posted the
    idea that for consumers whose company complied with the MLR
    requirements but didn't get a rebate, that they would get a
    notice so the company would--the consumer would understand that
    their company complied with the law and they got value for
    their insurance premium. So that is a proposal that we have
    made and we haven't finalized that idea yet.
        Mr. Griffith. So if that proposal were to be finalized,
    everybody would receive a letter in August 2012 talking about
    either rebates or we complied with the law in regard to this
    section----
        Mr. Larsen. Yes.
        Mr. Griffith [continuing]. Right before the election, but
    all the costs under the bill to the hardworking American
    taxpayers occur after the election. Isn't that correct?
        Mr. Larsen. Well, the timing----
        Mr. Griffith. You didn't fix the timing. I understand that.
        Mr. Larsen. And it doesn't have anything to do with the
    election.
        Mr. Griffith. But it is an accurate statement, is it not,
    sir?
        Mr. Larsen. It is accurate----
        Mr. Griffith. Thank you very much. I yield to Dr. Burgess.
        Mr. Burgess. Just one last series of questions on the
    budget, and going back to Section 1311(a) on the authority that
    you have, CCIIO has, to draw funds from the Treasury and
    administer grants to the States and territories to establish
    exchanges, the end of November 2011, I think you told us, $733
    million was obligated to the States and $27 million had
    actually been spent. Does that sound about right?
        Mr. Larsen. Yes.
        Mr. Burgess. So that was November. You may not have in
    right in front of you but can you provide to the committee what
    has gone out to the States since November?
        Mr. Larsen. Yes, we had another round of establishment
    grants so I think the total grants including everything--
    innovation grants, planning grants, establishment grants--I
    think is up to $800 million or $900 million. The rate at which
    States are drawing down on that money continues to lag behind
    the grants that we make as they go out and they do a
    procurement to hire outside experts and IT consultants and then
    procurement has to come on board and then the procurement
    agency has to bill, so there is a lag between the obligations
    and the outlays for the State grants.
        Mr. Burgess. Well, the previous projections estimated total
    of $2 billion would be spent in the exchange grants over the
    life of the program. When do you expect this money will be
    fully exhausted?
        Mr. Larsen. Well, unlike the $1 billion, the money that is
    available to provide grants to States is not limited. It is
    from a separate funding source.
        Mr. Burgess. So do you have a new projection for us on what
    the----
        Mr. Larsen. On how much States ultimately will spend? We
    don't. I mean, we are getting better insight into that as
    States come in with their grant applications and tell us what
    they think it is going to cost to build an exchange in their
    State, so----
        Mr. Burgess. Let me just ask you something. There are a lot
    of things that the last Congress and this Congress has done to
    sort of kick cans down various roads, and it looks to me like
    all the roads end in December of this year.
        Mr. Larsen. December of this year?
        Mr. Burgess. Yes, the doc fix, the unemployment insurance
    expiration, the unemployment insurance payroll tax holiday,
    Bush-Obama tax cuts, a lot of things expire at the end of this
    year. Of course, the alternative minimum tax always expires at
    the end of every year, so there is a lot of stuff that is going
    to happen at the end of this year. It is quite possible we will
    be at or near exceeding the statutory debt limit of the United
    States of America by that time as well. It is difficult as the
    increase in the debt limit was in August of last year. This
    time it will be without all the good feelings that we had last
    August. Do you worry at all that the subsidies and the
    exchange, which Mr. Griffith has already talked about, are you
    concerned that that may have to be postponed simply because we
    are out of money and cannot afford it?
        Mr. Larsen. Well, I certainly hope not and hope that
    everyone will come together to make sure that that doesn't
    happen because they are an important part of expanding the
    coverage provisions in the ACA.
        Mr. Burgess. Even if we are borrowing in excess of 40
    percent of those dollars that we are going to be handing out to
    people to subsidize their insurance?
        Mr. Larsen. We hope it doesn't happen because, you know, it
    is such an important part of the Affordable Care Act.
        Mr. Burgess. There is no place else to go for another
    sequester other than the Affordable Care Act. It has been
    remarkably protected. It has led a charmed life with all the
    other budget-cutting things that are going on. I have to
    believe at some point that charmed life expires.
        Thank you, Mr. Chairman. You have been generous. I will
    yield back.
        Mr. Stearns. I thank the gentleman, and we are all finished
    with our hearing. Does the chairman emeritus have any closing
    comments before I close the committee?
        Mr. Dingell. Just to thank you, Mr. Chairman, and thank our
    witness. Mr. Larsen, you have done a superb job.
        Mr. Larsen. Thank you.
        Mr. Dingell. I think it has been a very useful and very
    helpful hearing, Mr. Chairman, and I commend you for it.
        Mr. Stearns. All right. Thank you.
        Mr. Dingell. And I think that we have laid to rest a lot of
    the concerns that I have heard expressed, and we have been able
    to observe that some of the concerns I have heard have been
    essentially red herrings drawn diligently across the pathway of
    success in the future. I want to thank you for your fine
    participation in this, Mr. Chairman, and you, Mr. Larsen, thank
    you for your kindness. To my colleagues here, I want to say we
    appreciate your getting these questions out because they are
    valuable and they will lead us to a better understanding of the
    events before us in this legislation. Thank you, Mr. Chairman.
        Mr. Stearns. And with that, I would agree that this hearing
    will give us a better understanding of Obamacare.
        I want to thank the witness for coming today and for the
    testimony and members for their devotion to this hearing today.
    The committee rules provide that members have 10 days to submit
    additional questions for the record to the witness.
        With that, the subcommittee is adjourned.
        [Whereupon, at 12:22 p.m., the subcommittee was adjourned.]