[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

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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:]

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    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.]

                                 
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