[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]







                           THE CHALLENGES OF
                        THE AFFORDABLE CARE ACT

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 4, 2013

                               __________

                          Serial No. 113-HL09

                               __________

         Printed for the use of the Committee on Ways and Means



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON HEALTH

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   JIM MCDERMOTT, Washington
PAUL RYAN, Wisconsin                 MIKE THOMPSON, California
DEVIN NUNES, California              RON KIND, Wisconsin
PETER J. ROSKAM, Illinois            EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania            BILL PASCRELL, JR., New Jersey
TOM PRICE, Georgia
VERN BUCHANAN, Florida
ADRIAN SMITH, Nebraska





















                            C O N T E N T S

                               __________

                                                                   Page

Advisory of December 4, 2013 announcing the hearing..............     2

                               WITNESSES

Christopher Carlson, Principal and Consulting Actuary, Oliver 
  Wyman Actuarial Consulting, Incorporated.......................    28
Scott Gottlieb, M.D., Resident Fellow, The American Enterprise 
  Institute......................................................    17
Honorable Mike Kreidler, Insurance Commissioner, Washington State 
  Office of the Insurance Commissioner...........................    36
Grace-Marie Turner, President and Trustee, Galen Institute.......     7
 
                           THE CHALLENGES OF
                        THE AFFORDABLE CARE ACT

                              ----------                              


                      WEDNESDAY, DECEMBER 4, 2013

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 1100, Longworth House Office Building, Hon. Kevin Brady 
[Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Wednesday, November 27, 2013
No. HL-09

                Chairman Brady Announces Hearing on the

                 Challenges of the Affordable Care Act

    House Ways and Means Health Subcommittee Chairman Kevin Brady (R-
TX) today announced that the Subcommittee on Health will hold a hearing 
on the status of the implementation of the Affordable Care Act (ACA). 
This hearing will allow the Subcommittee to focus on the immediate and 
long-term challenges Americans face in finding affordable, quality 
health coverage as a result of the ACA. The hearing will take place on 
Wednesday, December 4, 2013, in 1100 Longworth House Office Building, 
beginning at 10:00 a.m.
      
    In view of the limited time available to hear from witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The American people are understandably concerned and focused on 
what the Obama Administration has called the ``fumbled'' rollout of the 
healthcare.gov system used to enroll American individuals and families 
into the Federal health insurance exchanges. The Administration has 
responded with a ``tech surge'' in an attempt to fix the consumer, 
security, verification, billing and payment flaws plaguing the 
healthcare.gov Web site. However, the ACA is more than a Web site and 
many of the law's major provisions, which are scheduled to go into 
effect in just under a month, will both impact the ability of 
individual Americans to maintain health care they can afford and access 
to their current doctors.
      
    Millions of Americans have received notices from their insurers 
informing them that because of the ACA their current plan is being 
cancelled, and they must now find a new health plan. Americans are also 
discovering that the premiums offered in the exchanges are higher than 
the Administration originally promised and for many, more expensive 
than their current plans. Employers are increasing out-of-pocket costs, 
dropping spousal coverage and reducing hours for their workers. 
Enrollment in the new exchanges has fallen well below the 
Administration's projections and many analysts have expressed concern 
that the young and healthy will not sign up in sufficient numbers to 
prevent premium spikes in 2015. Additionally, serious concerns also 
remain that the healthcare.gov system is incapable of securely handling 
an expected surge in volume in December while accurately verifying 
eligibility and fulfilling the necessary steps to carry out billing and 
payment functions.
      
    The hearing will examine and analyze the impact of the ACA on the 
healthcare system and explore ways to mitigate the adverse impacts of 
the law on the American people.
      
    In announcing the hearing, Chairman Brady stated, ``We are no 
longer debating what will happen when the President's healthcare law 
goes into effect. The Affordable Care Act, as it was written and is 
being implemented, is having the negative consequences on the American 
people we long predicted it would. Despite the President's many 
promises to the contrary, they are being forced to find a new and more 
expensive plan because the plan they have and like has been canceled. 
Individuals are being forced to buy coverage from a Web site that does 
not work. This is unfair to the American people. But let's be honest--
the problems we are seeing today are likely to get even worse. Some 
people will face a gap in coverage, premiums will likely spike even 
higher in 2015, and more and more people with employer-provided 
coverage will be adversely affected by the law. This hearing provides 
all of us an opportunity to get a better perspective on these 
challenges so that we can facilitate solutions to mitigate some of this 
pain.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the challenges of the ACA on the 
healthcare system and explore ways to mitigate the adverse impacts of 
the law on the American people.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Wednesday, December 18, 2013. Finally, 
please note that due to the change in House mail policy, the U.S. 
Capitol Police will refuse sealed-package deliveries to all House 
Office Buildings. For questions, or if you encounter technical 
problems, please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman BRADY. Good morning, everyone. The Subcommittee 
will come to order.
    Another day, another chance for the White House to fix 
their controversial healthcare law. Today families and patients 
abandoned by the new law learn that the Obama Administration 
launched a new and improved marketing campaign for the troubled 
law. Strange use of resources, given that the problems are with 
the policy, not with the politics. What is needed are real 
solutions, not more spin.
    The Affordable Care Act's fundamental problem can't be 
fixed with better marketing. The flaw is not the Web site; the 
flaw is the law itself. Improving the defective Web site won't 
make ObamaCare premiums more affordable. Improving the 
defective Web site won't prevent millions of Americans from 
walking to their mailbox only to find the healthcare plan they 
have and like is canceled because of the Affordable Care Act. 
Improving the defective Web site won't keep President Obama's 
promise that Americans will see a $2,500 reduction in their 
healthcare premiums, and won't prevent middle-class families 
from experiencing more expensive premiums and higher 
deductibles they simply can't squeeze from their already 
stretched budgets.
    And as one fellow Texan wrote to me, we are a family of 
three that paid $753 a month for health insurance when 
ObamaCare was enacted. We are now paying $1,117 a month for the 
same plan, a 48 percent increase.
    My Democratic colleagues repeatedly promised the ObamaCare 
exchanges would deliver a new, competitive marketplace that 
made it easy to shop for insurance, but the reality is far from 
that. In the several thousand counties served by the Federal 
exchanges, over half have plans offered by just one or two 
insurance carriers. In about 530 counties, American families 
have only one choice, just one insurer in the exchange. So 
fixing a defective Web site won't create competition and choice 
where none exists today.
    Now our small businesses have been told that the online 
shop exchanges they were told would come on, that they could 
count on for affordable healthcare options, has been canceled 
for next year. Does fixing a defective Web site restore that 
broken promise to our local businesses?
    We are all hoping for the best, but that November 30th 
deadline to fix the Web site problems has passed, and no one 
yet knows if the system has the capacity to enroll, actually 
determine subsidies, and complete a new insurance policy for 
all the millions of Americans abandoned when their policies 
were canceled by the President's new healthcare law. To do so, 
the new improved Web site will need to enroll close to 100,000 
people per day every day this month, and that is how many who 
selected a plan in all of October.
    Regrettably, at this point the American public has little 
confidence the Web site is ready for prime time and this latest 
promise will be kept. The clock is ticking. We are right in the 
middle of prime time for individuals, for families and small 
businesses to find affordable health care that begins on 
January 1st. What will these patients and families do when they 
show up to the hospital or need to reorder a lifesaving 
prescription on New Year's Day, and their ObamaCare care plan 
isn't yet available? This coverage gap is real, and the White 
House has said it has no plan B to prevent this frightening 
problem.
    Looking forward, the flaws in the law may prove to be 
getting worse, not better. The young and healthy are not 
signing up, which is bad news. Connecticut, for example, 61 
percent of the enrollees are between the age of 45 and 64; in 
California, 56 percent. And that is double their proportion of 
the State's population. But without the right mix of the young 
and old, the healthy and sick, healthcare premiums for 2015 
will skyrocket, access to care will become more limited, and 
insurers may no longer offer coverage. Plus the mandate on 
local businesses slams into effect in 2015, forcing local 
companies to consider cutting hours, or workers, or healthcare 
benefits to comply with the onerous law.
    Today's hearing is not about a new and improved marketing 
campaign. It is not merely about a defective Web site. It is 
about the real-life impact of a law that is not living up to 
the promises made to the American people by President Obama and 
my Democratic colleagues.
    Before I recognize Ranking Member McDermott for the 
purposes of his opening statement, I ask unanimous consent that 
all Members' written statements be included in the record. 
Without objection, so ordered.
    And I will recognize Ranking Member Dr. McDermott for the 
opening statement.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    I want to welcome all our witnesses, and especially my 
fellow Washingtonian Congressman Kreidler, now Commissioner 
Kreidler.
    As we look at the progress of the Affordable Care Act, I 
would like us to remember how it got here. With the way we talk 
about the ACA, one might wonder why would we ever abandon the 
old system in the first place? I will tell you why: It was 
unhealthy, it was unfair, and it was unsustainable. Healthcare 
costs, one of the largest contributing factors to our national 
debt, were out of control. People were going bankrupt. The cost 
of providing care to the uninsured added an extra $1,000 a year 
to each family's household bills through higher taxes, 
premiums, and healthcare costs. Coverage was dropped when 
customers needed it most, and over the country those with 
preexisting conditions were just out of luck. So let us keep 
those conditions in mind as we discuss our progress. It wasn't 
the Democrats that wanted a better system, it was America.
    Are we as a society better off now? The answer is a 
resounding yes. We have made huge improvements in the system. 
It hasn't been perfect, and I am sure we will hear some 
interesting and upsetting testimony today about our 
witnesses'--from our witnesses, though what I have read, many 
of their assertions are unreliable, if not untrue. Even with 
glitches, the ACA reforms are making the insurance industry 
more accessible, fair, and cost-efficient than ever before.
    Looking at our progress, I am less concerned about Web 
sites than the reality that we are creating two separate 
Americas. While one-half of our country moves ahead with 
affordable health insurance, the other half is being left 
behind. Places like Indiana, Georgia, Florida have chosen not 
to expand Medicaid, leaving hundreds of thousands of people who 
are most vulnerable with no help available. Texas has over a 
million people that could be insured at no cost to the State if 
the Governor chose to expand Medicaid. Instead, Texans who need 
it most, the working poor, families on minimum wage, and 
veterans trying to get back on their feet get nothing.
    It is hard to imagine a reason for this other than simple 
spite. It is cruel and fiscally irresponsible. Hospitals in 
these States will lose billions of dollars in revenue as they 
provide more uncompensated care instead of accepting a half a 
billion Federal dollars. Mississippi has transferred 4.4 
million from its State budget, including education funding, to 
pay hospitals for uncompensated care. Some hospitals have had 
to close facilities and service lines.
    And if that weren't enough, Republicans are urging 
constituents to turn down affordable care. Oklahoma has filed a 
lawsuit arguing that Oklahomans are not entitled to the tax 
credits through the exchange. Tennessee, among others, is 
trying to create penalties to make it as hard as possible for 
churches and nonprofits to help people sign up. A good 
Samaritan, even a friend or a neighbor, caught, quote, 
``facilitating enrollment,'' close quote, without being vetted, 
fingerprinted, and registered with the State, could be fined 
$1,000 for each offense. All this to make the President look 
bad.
    Now, fortunately, we have an unbiased witness here today 
who is actually making this all work. Commissioner Kreidler can 
speak directly to what happens when a State cares about its 
people. He has actual experience in the front lines of 
implementation. Washington State has reached nearly 175,000 
enrollments through our State exchange, and those numbers are 
growing every day. Each--our exchange is robust and, with the 
exception of a few issues, has run pretty smoothly.
    I had a constituent call my office irate that his insurance 
company had canceled his plan and offered him a new one at 
double the price. The next day he called back. He went to the 
exchange and found a better plan with his old insurance company 
for less than he was paying before.
    As the home of companies like Microsoft, Amazon, Starbucks, 
Washington State knows about launching big projects. The Boeing 
787 wasn't built in a day. Success doesn't come without bumps. 
It takes commitment; it takes investment and patience. If Bill 
Gates had stopped at the first hiccup, where would the personal 
computer be today? We knew this wouldn't be easy, but it is 
worth it, and this is the reform that America wants and needs.
    I yield back.
    Chairman BRADY. Thank you, Dr. McDermott.
    Today we will hear from four witnesses: Grace-Marie Turner, 
president and trustee of the Galen Institute; Dr. Scott 
Gottlieb, resident fellow at the American Enterprise Institute; 
Chris Carlson, principal at Oliver Wyman Actuarial Consulting, 
Incorporated.
    And I would like to turn to our Ranking Member to introduce 
our fourth witness.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    I mentioned Commissioner Kreidler. He was a Member in 19--
he came in in the sweep of 1992, when a lot of Democrats came 
in here, and the Clintons were elected, and we thought we were 
going to have health care. And he was here to work on that. He 
and I had worked in the legislature for a number of years on 
this whole issue and put together the Washington Basic Health 
Plan and other things.
    Two years later, he was back in the State of Washington 
doing other things after the failure of the Clinton effort. He 
since then has become the longest sitting insurance 
commissioner elected--elected commissioner in the country, and 
knows all the ins and outs of this issue, and will be a good 
witness today for people to find out what happens in a State 
where they went from the first day to make it happen, and they 
have done a very good job. So it is my great pleasure to 
introduce Mike Kreidler.
    Chairman BRADY. Right. Thank you, Doctor.
    Ms. Turner, you are recognized. And we reserve 5 minutes 
for each of the opening statements.

 STATEMENT OF GRACE-MARIE TURNER, PRESIDENT AND TRUSTEE, GALEN 
                           INSTITUTE

    Ms. TURNER. Thank you, Mr. Chairman. Thank you, Chairman 
Brady, Ranking Member McDermott, distinguished Members of the 
Committee, for the opportunity to testify today.
    All eyes have been focused recently on the Web site, but 
there are many challenges that I would like to talk about that 
are in store that will impact tens of millions of Americans who 
are not affected directly by the law, according to the 
President. He says 85 to 90 percent of Americans who already 
have health insurance, for them their only impact is that their 
insurance will be stronger, better, more secure than it was 
before; they don't have to worry about anything else. But that 
is really not their experience.
    I will focus primarily on the impact on the 150 Americans 
who have coverage through their employers; employers have been 
providing health insurance voluntarily for more than 70 years. 
They see it as a way of attracting good workers. But the ACA 
places significant burdens on them that are really forcing them 
to rethink their arrangements.
    Small businesses are hit especially hard. An estimate in 
the June 2010 Federal Register predicted that up to 80 percent 
of small business plans could be lost because they don't comply 
with the ACA's requirements. Many employees will find that 
their new ACA-compliant coverage is more expensive and less 
attractive, higher premiums, higher deductibles, and narrower 
networks.
    The Congressional Budget Office estimated that as many as 
11 million workers could lose their health insurance simply 
because their employers find that they have no choice but to 
pay the fine and drop their health insurance coverage. The 
American Action Network suggests the number could be as high as 
35 million people, in small businesses primarily.
    Many employers also are being forced to cut hours so that 
they can stay under the 50-employee, full-time employee cap. 
This is a significant income loss, obviously, for the 
employees, but it is also a painful decision for employers who 
really want to keep full-time workers and is disruptive for 
their businesses.
    I have spoken with the owners of many small businesses who 
say that the $2 to $3,000 fine would basically consume their 
entire profit margin, not just providing health insurance. And 
the 1-year delay really isn't helping because they have to plan 
longer term for their--for business planning. A delay in the 
shop exchange was really--that the chairman mentioned was yet 
another blow to them.
    I describe in my testimony, my written testimony, many of 
the new taxes and other mandates and penalties that employers 
face. In particular, the tax on individuals, a $63-per-person 
tax, that adds the cost of every health insurance policy, the 
tax that will cost families an additional $360. These add taxes 
and no new benefits, and it is simply pushing up the cost of 
coverage.
    Susan Carrick, who is head of human resources at the 
University of Virginia, described what her choices are. She 
said, when medical expenses go up, which they have and which 
they are, we can either increase premiums, or we can reduce 
what we pay out in the way of benefits. She said, the law is 
expected to cost $7.3 million to the University of Virginia's 
health plan in 2014 alone.
    In addition, of course, millions of people with individual 
policies are really among the first targets of this law. They 
are losing their coverage. Five percent of Americans represents 
15 million Americans that we think we really do--must attend to 
are having a difficult time finding coverage.
    I do believe that there are some near-term policy fixes 
that are going to be required. There--the House passed, of 
course, the Keep Your Coverage Act. The Senate has a similar 
measure that Senator Johnson is offering. And I think that if 
we can encourage the Senate to take that up, we need to give 
people a chance who have coverage that they like, who can't get 
onto the exchange, who find the exchange coverage is more 
expensive, that they find that they are able to keep their 
policies.
    Second, and I think this is crucially important, those who 
are on high-risk plans now, either the 200,000 or so who are on 
the 35 State high-risk pools, many of which are being closed, 
or the about 100,000 who are on the Federal temporary high-risk 
plan, are desperately trying to get new coverage. Many of them 
have chronic illnesses, they are in the midst of chemotherapy, 
and they have a child with significant health problems. They 
need someplace to go for coverage. And I strongly encourage us 
to think about what we can do to extend those high-risk 
programs to make sure people who desperately need care are not 
forced to leave coverage.
    I see my time is up, Mr. Chairman.
    [The prepared statement of Ms. Turner follows:]
    
    
    
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
  
    Chairman BRADY. Yes. Thank you, Ms. Turner, very much.
    Dr. Gottlieb.

    STATEMENT OF SCOTT GOTTLIEB, M.D., RESIDENT FELLOW, THE 
                 AMERICAN ENTERPRISE INSTITUTE

    Dr. GOTTLIEB. Mr. Chairman, Mr. Ranking Member, thank you 
for the opportunity to testify today. My name is Scott 
Gottlieb. I am a physician and resident fellow at the American 
Enterprise Institute. I previously served at the FDA and CMS, 
and I also sit on the policy advisory boards to the Society of 
Hospitalist Medicine and the Leukemia and Lymphoma Society, as 
well as being a clinical assistant professor at the NYU School 
of Medicine.
    In time, the existing parts of this Web site will be fixed, 
but more significant challenges remain related to issues around 
provider access and the quality of the medical care. I fear 
many consumers who enroll in these plans will find themselves 
disappointed by the resulting health plans, or, worse, get 
caught in difficult financial and medical binds. And I want to 
focus on three significant but remaining challenges that I 
believe will lower the quality of the resulting care and hinder 
consumer access to needed medical services. I believe there are 
steps we could take today to mitigate these challenges, but 
unless we act quickly, the law does not provide flexibility to 
address some of these problems.
    First, the information infrastructure required for 
reconciling someone's coverage with his health plan or his 
providers has not been constructed; in some cases, simply does 
not exist. As a result, it is likely that there will be delays 
in enabling premiums to be collected and paid to health plans, 
and, in turn, health plans are likely to withhold payments to 
providers. People signing up for coverage may not, as a 
practical matter, be covered starting January 1st. This needs 
to be addressed by Congress immediately to avoid significant 
potential hardships.
    Second, it is now well established that more than 50 
percent of the plans sold on healthcare.gov are narrow network 
options that offer a very limited choice of providers. I don't 
think the full scope of how restrictive these networks have 
become is fully appreciated or the extent of the costs that 
will get transferred to patients. This is going to put 
particular hardship on patients with special medical needs and 
serious illnesses. And, once again, the statute and regulations 
do not afford easy ways to mitigate these challenges.
    To give you some context for how this is playing out at a 
practical level, we are providing from AEI today some data we 
developed on Blue Cross Blue Shield--one Blue Cross Blue Shield 
plan that operates in nine different States. We compared the 
exchange network to their commercial individual market PPOs, 
just six categories of specialists. We consistently found that 
the exchange-based plans offered just a fraction of the 
specialists available in competing non-exchange PPOs, and we 
looked at the most populous counties to give them the best 
chance at coming out ahead.
    Among some of our other anecdotal findings, we found a plan 
in Florida that currently has only 7 pediatricians in its 
network that serves a county that has 260,000 children, 
according to census data. In San Diego, we found a health plan 
doesn't have a single pediatric cardiologist in its network. In 
San Bernardino County, we found a plan with the nearest 
urologist that was offered was 80 miles away, and the same plan 
has nine dermatologists in it, but none of these doctors seem 
to perform mole surgery for skin cancer, and most of them are 
at least 100 miles away from the county.
    The problems are made worse by incomplete oversight that 
has been applied to resulting plans. Review of plan design, 
network adequacy was rushed and done poorly. With lax oversight 
there is a risk that plans can inadvertently or sometimes 
intentionally game the risk pool by their choice of providers 
and their design of networks.
    And, finally, keep in mind that these narrow networks do 
not just affect providers. The same constructs will also hamper 
patient access, especially drugs. If you are on a non-formulary 
medicine, you could be saddled with much or all of the cost of 
the medicine. This is going to be a particular burden to 
patients with significant conditions, like cancer. These cuts 
won't count against out-of-pocket limits, deductibles, or 
lifetime caps.
    Third and finally, there is already evidence that providers 
are reluctant to sign contracts with the ObamaCare plans, and 
when they do, reimbursement is being reduced even off the 
levels that were initially negotiated under some ObamaCare 
contracts. There should be every reason to expect that the same 
sort of problems with access and quality that challenged the 
Medicaid program will also challenge ObamaCare.
    People who will make out worse under ObamaCare seem to be 
getting short shrift in a lot of the policy discussions. There 
seems to be a perception among some that these folks are mostly 
wealthy or upper-middle-class families. That is not entirely 
true. Many of these families are solidly middle class, and many 
struggle financially. Nor are the misperceptions of their 
relative wealth an excuse to ignore their plight.
    The fact is that in aiding those who are burdened in the 
old insurance markets, and some people will clearly be helped 
under ObamaCare, it didn't require us to harm those who were 
doing reasonably well under those old structures. And even 
those who were previously uninsured or only intermittently 
insured will find many of the bronze plans that they are being 
incentivized to join providing lower-quality access.
    Thank you.
    [The prepared statement of Dr. Gottlieb follows:]
    
    
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    Chairman BRADY. Thank you, Doctor.
    Mr. Carlson.

  STATEMENT OF CHRISTOPHER CARLSON, PRINCIPAL AND CONSULTING 
    ACTUARY, OLIVER WYMAN ACTUARIAL CONSULTING, INCORPORATED

    Mr. CARLSON. Good morning, Chairman Brady, Ranking Member 
McDermott, and Members of the Subcommittee. My name is Chris 
Carlson, and I am the principal and consulting actuary at 
Oliver Wyman. I would like to thank you for affording me an 
opportunity to share my perspective on the Affordable Care Act.
    My testimony will focus on the consequences of the 
difficulties encountered in implementing the ACA. The specific 
issues that I will address are, first, the enrollment issues 
which have led to initial enrollment in individual policies 
falling well below original estimates; second, the extension of 
current individual policies that do not meet the requirements 
of the ACA's minimum coverage requirements; and, third, I will 
discuss the premium rates that are available to individuals on 
the exchanges.
    First, regarding the low initial enrollment, it is too 
early to make any speculation about the final enrollment 
numbers for 2014, but given the low enrollment numbers that we 
have seen, there is an expectation that the enrollment will be 
less than expected. In fact, Goldman, Sachs & Company has 
revised down projection estimates of the Federal exchange 
enrollees from 7 million to 5 million.
    Also, early indications are that the younger enrollees, who 
are crucial to the goal of having a balanced risk pool, may be 
enrolling in rates less than expected. If younger individuals 
do not enroll at the expected levels, the subsidies that are 
built into the rates that allow for premium rates to be lower 
at the older ages will not be realized, putting a strain on the 
overall risk pool.
    Next I will briefly discuss the President's use of non-
enforcement of existing law to allow for the extension of 
current policies that do not meet the minimum coverage 
requirements under the ACA. There are a number of potential 
outcomes that could result from this extension. First, studies 
prepared by the Society of Actuaries show that those currently 
insured in most States have better morbidity risk than the new 
enrollees expected for 2014. Therefore, it was expected that 
premiums would go up because of this increased morbidity risk. 
Furthermore, many current policies do not provide sufficient 
benefits to meet the minimum coverage requirements of the ACA. 
Therefore, individuals who are currently insured in less than 
sufficient policies would see further increases due to an 
increase in benefits for the exchange policies. While this 
generally is a trade-off between premium for additional 
benefits, those opting to drop current, less generous policies 
are those that are likely to need that additional benefit 
coverage. Both of these factors lead to an expectation that the 
pool of members enrolling in the ACA-qualified plans on the 
exchanges will have higher morbidity risk than if the extension 
of policies was not allowed.
    In addition, since insurers have not been given the 
opportunity to revise the premium rates on the exchanges, it is 
likely that these policies will be underpriced. As a result, we 
have seen hesitation from some State insurance regulators to 
allow for the extension of these policies.
    It is too early to provide any empirical data to estimate 
the impacts of the exchanges on the expected costs for 2014; 
however, the American Academy of Actuaries has identified three 
primary consequences of the extension of current policies. One, 
premiums for 2014 may not adequately cover the cost of 
providing benefits for an enrollee population with higher 
claims than anticipated; costs to the Federal Government could 
increase as higher-than-expected average medical claims are 
more likely to trigger the risk-corridor payments; and, third, 
relaxing the plan cancellation requirements could increase 
premiums for 2015. Insurers could not increase premium in 
future years to make up for prior losses; however, assumptions 
regarding the composition of the risk pool would reflect this 
plan experience for 2014.
    There has been much written and said about the premium 
rates on the exchanges. Depending on the point of view, premium 
rates are either much higher than expected or much lower than 
expected. However, I will repeat what was said in the hearing 
of the House Energy and Subcommittee on Oversight and 
Investigations by Cori Uccello, an actuary of the American 
Academy of Actuaries: ``How premiums will change depends on 
many factors. The new benefit requirements that may lead to 
higher premiums but lower out-of-pocket costs, how each State's 
current issue and rating rules compare to those beginning in 
2014, and each individual's demographic characteristics and 
health status.''
    All of these things remain true. I will highlight a couple 
of these items that merit specific attention. First, 
individuals who are seeing the greatest increases in premiums 
are those who had the least amount of coverage; therefore, the 
initial premiums for additional benefits.
    Second, any consideration of the increase in premium rates 
is considered prior to the availability of the premium 
subsidies that would reduce the actual out-of-pocket costs for 
individuals.
    That concludes my oral testimony, and I thank you for 
inviting me, and I look forward to answering any questions.
    [The prepared statement of Mr. Carlson follows:]
    
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    Chairman BRADY. Thank you, Mr. Carlson.
    Congressman Kreidler, welcome back.

      STATEMENT OF THE HONORABLE MIKE KREIDLER, INSURANCE 
    COMMISSIONER, WASHINGTON STATE OFFICE OF THE INSURANCE 
                          COMMISSIONER

    Mr. KREIDLER. Thank you, Chairman Brady. Thank you, Mr. 
Chairman, and Ranking Member McDermott, and Committee Members.
    I would like to try to cover a couple of topics here, the 
challenges that we have in the State of Washington, the--how it 
is currently working in the State of Washington, and the need 
going forward for collaboration.
    My name is Mike Kreidler. I am the Washington State 
insurance commissioner, and in this capacity as insurance 
commissioner for the State of Washington, I have had lots of 
conversations with people that contact--we get 100,000 phone 
calls a year through my office. Over the years this became 
clear that there were a lot of people out there that were 
really hurting, who were with limited access to health 
insurance. It was either unaffordable to them, or they would 
find out the existing policy they had when they had a major 
incident in their life, having bad luck that their policy was 
significantly inadequate to meet their needs.
    What I see right now with the Affordable Care Act are the 
tools, the tools that we need in order to help make sure that 
people have access to health insurance that is affordable to 
them. And that is partly because of subsidies that are 
available to them; also increased access in the State of 
Washington to the Medicaid program. All of these are making it 
possible to help. If it isn't the Affordable Care Act, then let 
us name something else that is going to accomplish essentially 
the same purposes as the Affordable Care Act.
    Washington has significant problems with the current system 
without the reforms. We have got over a million people without 
health insurance. In addition to that, we have got 2- to 
300,000 people who do have insurance, but it is inadequate 
insurance, meaning that when they have a medical crisis in 
their lives, it is not going to meet their needs. Such things 
as pharmacy coverage, 80 percent, approximately half--80 
percent of the individual market in the State of Washington 
doesn't cover pharmaceutical, much less maternity.
    Going forward, as you look at the Affordable Care Act, 
there are a lot of people that refer to it as somehow a 
government takeover of our health insurance system. This is 
built on the private insurance system. It is built on what I 
saw when I was a Member here, Mr. Chairman, that was put 
forward with the Dole-Chafee bill that had 20 Republican 
sponsors in the Senate on it. It is very--very comparable with 
the philosophy that came forward with the Heritage Foundation 
in the late 1980s. It really is not a Democratic proposal; it 
is built on the private insurance system.
    Now, Washington does have an exchange. It is up and 
operating. It is enrolling--as Ranking Member McDermott pointed 
out, we have got 100,000 people enrolled, 175,000 people who 
are queued up right now to be enrolled. It is proceeding quite 
nicely. And for those reasons I said no to the opportunity to 
extend existing policies. It would have been very disruptive, 
as Mr. Carlson pointed out, to our market if we had allowed 
that to take place, because the Affordable Care Act is working 
in the State of Washington.
    You know, I know that we have had some problems. Whether we 
talk about the canceled policies, or whether we are talking 
about Web site's operability, those are challenges, and those 
are good things to bring up. But it is also important to take a 
look at major programs historically, whether it is Social 
Security, whether it is Medicare, or whether it was the 
pharmaceutical benefit under the Medicare program. They have 
all had challenges as they started up, particularly when we 
look at the pharmaceutical program and some of the problems 
they had. I saw that because I was the insurance commissioner 
at the time.
    What I would like to urge people to do is to be patient. 
This is in the early stages of enrollment. Don't just look 
right now and say, this issue right now is an impediment. And 
the headline of the day is not what we need to be doing. It is 
being patient and going forward. Focus on the benefits of the 
Affordable Care Act to consumers. If you can take the name of 
``Obama'' out of ObamaCare and just focus on the benefits, you 
find the benefits are widely popular in virtually every 
district in the United States.
    Rome wasn't built in a day. And I can tell you right now 
the problems with our current existing healthcare system didn't 
occur in a day. We need to be patient, move forward, and focus 
on enrollment. It is--enrollment is only in its early stages at 
this point. States like mine need you. I would urge you to be a 
critic; that is fair, that is reasonable, it is expected, 
particularly from the party that did not advocate for the 
Affordable Care Act. But at the same time we need to solve 
problems, because going forward we are talking about people 
that are hurting. We need to make changes not just for these 
people, but also to address the challenges for the U.S. economy 
if we don't make these changes.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Kreidler follows:]
    
    
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    Chairman BRADY. Thank you, Commissioner, Congressman, 
appreciate your testimony.
    One, congratulations on running a model exchange. Two 
things stand out. One is that you did testing, extensive 
testing, of your Web site and exchange before the deadline hit. 
I wish Washington would have followed your lead, because this 
has led--despite repeated assurances to this Committee and all 
of Congress, both parties, that was not done.
    And the second thing that stands out really drives my first 
question, which is the coverage gap. You are running as good as 
exchange as exists in America, yet so far have only signed up a 
fraction of those in Washington State who have received 
cancellation notices. We are all concerned about the potential 
coverage gap on January 1st as a result, again, of this 
defective rollout.
    So, Ms. Turner, let me start with you. How significant 
could that coverage gap be for families in America? How 
significant could it be that families show up on New Year's Day 
in the hospital needing that lifesaving prescription and find 
that what they signed up for didn't actually make it all the 
way through the process, they don't have that coverage? How 
concerned should we be?
    Ms. TURNER. One hundred percent concerned. It is absolutely 
going to happen. When we have a deadline of December 23rd for 
people to enroll, and all of that paperwork has to be processed 
that people think that their coverage will start on January 1, 
I think it is just--it is impossible for everyone that signs up 
on--by December 23rd to get coverage and to have that work 
through the system.
    And in particular we see that the data that is coming from 
the Federal hub, from the Federal Web site, that the 480--843--
the 834 forms are inadequate and wrong. At least a third of it 
is inaccurate.
    So I think it is a huge, huge concern that people are doing 
their best to try to sign up for this coverage and are not 
going to be able to get through the Web site and be able to be 
signed up, and may, even worse, think they are and have it not 
be processed.
    Chairman BRADY. Thank you.
    Dr. Gottlieb, you, in your testimony, point out something I 
don't think anyone has focused on, which is the payment gap, 
the part of the process where after you enroll--in your 
testimony, you say the system to ensure that our local 
healthcare providers are being reimbursed does not yet exist in 
the system. Could you talk a little more about--and why should 
we be concerned about that?
    Dr. GOTTLIEB. Well, the issue is whether or not people who 
think they have enrolled in a plan on the exchanges are 
actually enrolled in those plans. With the information--we know 
that the back end hasn't been built yet, and we know that the 
subsidies that should flow to the insurers aren't going to flow 
on the insurers appropriately or on time. And so the question 
becomes what do the insurance plans do if they don't have 
someone either appropriately enrolled in their plan or that 
they have been paid for? And while I think they are going to be 
hard pressed not to honor the contract that they--or the, you 
know, purported contract they have with that consumer, I am 
hard pressed to believe that they are going to allow money to 
flow to providers when they haven't been paid on those 
policies. They are going to hold up those payments.
    It is not clear exactly what they are going to do, frankly. 
That is why we should be thinking about this and worried about 
this, because people are going to start to try to access care 
in January, and either the providers aren't going to get paid 
on time, and they could very well drop out of these plans, or 
the contracts might not be honored at all.
    Now, I know the Administration made an announcement last 
night that they are going to effectively guarantee those 
payments. I don't think that fully resolves this problem, 
because it doesn't resolve the issue of what the insurers are 
going to do with the providers when they haven't been paid yet, 
they haven't either received the premiums, appropriate 
information to enroll the beneficiary, or haven't received the 
subsidies.
    Chairman BRADY. So if Washington doesn't pay its bills on 
time, the insurance company--they are going to be in a bind in 
paying those local doctor bills and hospitals as well. Is 
that----
    Dr. GOTTLIEB. That is right. We have seen the insurance 
companies do this in the past. If they are not getting paid, it 
is a reasonable expectation that they are not going to let 
money flow out to pay bills.
    Chairman BRADY. I don't think many of us are worried about 
the insurance companies. We are really worried about the 
process of does that local doctor--are they assured that they 
are actually going to see reimbursement. And I think that is 
the concern.
    Dr. GOTTLIEB. And if they don't, they might not continue 
providing care. They might have to drop out of these contracts, 
and it is just going to further strain the access issue.
    Chairman BRADY. Let us talk about that. Let us talk sort of 
about the doc shock, which may be--after sticker shock may be 
our biggest challenge for our families, which is in your 
testimony, you pointed out that many of these plans are a very 
narrow network. And so the affordable ones--at least those with 
the lower prices. So a family may find they can't see a doctor 
that they have seen, or they see multiple doctors, can't see 
both a local hospital or provider, and may well be forced out 
of network. And in your testimony you make a case that when 
that occurs--not if it occurs, when that occurs--that patient 
will be maybe required to carry the entire cost of that 
treatment, and it won't count toward their deductible, or out-
of-pocket caps, or any of that. So, in effect, you are saying 
they almost are going to see a HMO experience with them paying 
extremely steep bills under these plans; is that correct?
    Dr. GOTTLIEB. Well, that is exactly right. I think--you 
know, conceptually, in the 1990s, when HMOs were first 
introduced, people rejected them. We had the Patients' Bill of 
Rights introduced into Congress. And most consumers 
demonstrated that they prefer PPO-style plans, which afforded 
flexibility on providers, and they were willing to trade away 
some benefits and higher copays and deductibles for that 
flexibility.
    I think what the Affordable Care Act really does is force 
us back into that old option, the HMO-style option, where you 
are trading away the flexibility in favor of this government-
guaranteed benefit package and really not lower copays or 
deductibles. The copays and deductibles are fashioned off of 
catastrophic plans here. So they are still quite, quite high. 
But it is a foregone conclusion that you won't be able--if you 
have multiple doctors, it will be very hard to envision 
patients being able to keep their full complement of providers.
    Now, the fact is that it is very hard to get a handle on 
what these networks look like. We tried hard. And a lot of the 
networks aren't even formed yet, which begs the question how 
these even--these plans even got through the review process at 
CMS. But that said, they are not even formed. So patients are 
enrolling in plans where they really don't know what the full 
network is.
    We did a study. We put out an analysis on Anthem Blue Cross 
Blue Shield. And, frankly, we chose that plan because they are 
the most transparent. They provide their full network not only 
for the exchange-based plans, but also for their commercial 
market. Also, they are highly regarded. So we dealt with one of 
the better plans. And we picked the most populous county in 
each State to look at, and looked across six specialty areas, 
and the numbers were pretty grim. And I think that this 
represents the high watermark. This is probably the best you 
are going to see. When we looked at Molina Health, for example, 
a Medicaid plan, it looked far worse, but it was much harder to 
get data because the network information wasn't available in 
all of the States. But this is going to present a lot of 
challenges to patients.
    Chairman BRADY. Could that doc shock also apply to 
medicines? You know, if you--you are a patient using either new 
or specialized medicines, could that formulary also be narrower 
in those plans so that you are faced with the same very high 
out-of-pocket costs that don't apply to any of your deductibles 
or your caps?
    Dr. GOTTLIEB. Yeah. It absolutely does apply to medicines. 
It hasn't been as acute of an issue so far, one, because people 
haven't tried to tap the insurance, and, two, because a lot of 
the States benchmarked off State plans that had reasonably good 
formularies. But if the drug isn't on your formulary, then you 
are going to have to pay out of pocket for it. And, again, the 
coinsurance applies. You could pay all of the money out of 
pocket. So you could be out a lot of money.
    Now, there is a way to appeal to CMS to try to get that 
overturned, to get the drug paid for, but most patients aren't 
going to be able to go at risk if it is an expensive cancer 
drug, for instance. First of all, they are not going to be able 
to go out of pocket for the 3 or 4 months it might take to 
appeal. And even on a risk-adjusted basis, even if their doctor 
says, look, there is an 80-percent chance I will win the 
appeal, that 20-percent chance might be too much for them to 
take because the money would be so substantial that they would 
be forced to pay. So I think that this will be prohibitive.
    Where this is going to become a much more acute issue, 
first of all, some States that don't have good model 
formularies, but also going forward, new drugs, it is going to 
be slow to see new drugs introduced into those formularies 
because of the process that is being put in place. So access is 
going to be inhibited for newer therapies as we go forward and 
as these formularies should adapt over time to new--to new 
treatments.
    Chairman BRADY. Right. I think this is an important issue, 
it hasn't been highlighted much, but it is a real concern for 
the families who don't fit into the box, as Washington likes to 
do.
    You are right about the uncertainty back home. I met 
roundtable with our local hospitals. One of them--they don't 
know which plans they are in. One of them has figured out that 
they are in 23 of 56 plans in Texas. Two of the other hospitals 
had no clue what they are included in. The doctors talked about 
really the return of the HMOs. One of them sort of jokingly 
called this ``HMObamaCare'' because of those narrower networks 
and the concern that those out-of-network costs will be so 
high.
    Let me ask, you know, aside from the sticker shock and 
potential doc shock our family could face, the testimony today, 
we saw, really lays out next year as sort of an aftershock to 
where we are right now, because of the enrollment problems, 
because of the mix of those who are enrolling that are--
families may well face much higher premiums next year and end 
the mandate their local businesses offer.
    Mr. Carlson, can you address that for a moment?
    Mr. CARLSON. Well, I mean, I think it has been, you know, 
clear in some of the statements the actuarial community has 
made that there are a lot of forces that are changing premium 
rates. Obviously, I speak of this prior to any consideration of 
the premium subsidies. But, you know, most of the changes in 
the benefit requirements and most of the change--you know, you 
have the insurer piece and those other factors that are driving 
up the premium rates. Then when you look at the gender rating 
and other market reforms, again, specific populations that are 
targeted there create a premium rate increase for that 
particular population; for example, younger individuals. So, 
you know, that is a concern to individuals buying insurance on 
the exchange.
    Now, another concern, and I talked about it in my 
testimony, you know, we need to get our premium rates filed by 
sometime at the end of spring or toward the end of spring, but 
then we are going to have very little information to work with. 
So, if our enrollment is not enough to provide any valid data, 
again, we are going to be kind of, I don't want to say 
guessing, but having to make some pretty significant 
assumptions about what premiums are going to be in 2015, which 
makes our job a little more difficult. And if the risk pool is 
not a broad and balanced risk pool, which is going to put 
upward pressure on the premium rates for 2015 as we try to work 
with the data we do have.
    Chairman BRADY. And I think this point: One, to be fair, we 
need to allow the White House to finish their push to see what 
that enrollment mix will be. But I think the point we have 
heard today in a number of the testimonies is that if the 
younger don't sign up and the healthier don't sign up, in 
significant amounts, and if the White House misses the $7 
million goal significantly, it could well lead, depending on 
that mix, to higher rates in 2015.
    Well, thank you all very much for your testimony.
    Dr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    As I listen to this testimony, there are two countries. 
There are those States where they put up a State exchange, and 
then there are all the rest that sat back on their hands and 
said, let the Federal Government do it so we can throw rocks at 
them later because it isn't working.
    Mr. Kreidler, I would like you to talk about how you got 
bipartisan support to put together and begin a long time ago. 
Nothing that we have heard testified here today is unknown. It 
has been known for 3 years. So you knew in 19--or 2005 that you 
were going to have--or 2009 you would have certain problems, 
and you started working on them, the narrow networks and all 
the rest. I would like to hear how you went through the process 
of putting together an exchange that works.
    Mr. KREIDLER. Thank you, Congressman McDermott.
    Let me say that, you know, I sit as a board member of the 
Health Benefit Exchange in the State of Washington, and as such 
I can tell you right now that the makeup of the board looks 
like a rainbow coalition, so to speak, of political views. We 
don't always agree on the best course of action, but we always 
have from--our primary focus and interest is making sure that 
it works, that people have access to health care, that it has 
affordable.
    And from the standpoint of looking at the networks that are 
out there right now, that has been a job for our office, and 
inside the exchange, obviously, one part of the change that we 
are seeing right now are narrower networks. And as a part of 
that right now, we are taking very seriously to make sure that 
if there is a problem from the standpoint of making sure that 
there is an essential benefit, and it is not in part of the 
network, that they will be treated as in network and from the 
standpoint of the patient and the consumer. So that they wind 
up getting the benefit of the doubt when they do have those 
exclusive types of benefit, whether it is cancer treatment, or 
whether it is hemophilia, or whatever it might be, we make sure 
that they are going to still be--if the promise has been made 
in the policy, we are going to make sure the insurance company 
lives up to that promise.
    So we are working to endeavor to make sure that that 
happens so that as we go forward, we see health carriers that 
are playing a much more active role now in plan management, 
something that all of us thought was really important going 
forward to see that that happened, and we are starting to see 
it right now. We want to make sure that it is not something 
that disadvantages the consumer. And from the standpoint of 
services that can be bought competitively in the market, that 
are comparable quality and outcomes, that is desirable if it 
offers a better price and reasonable access.
    Access is what we--we are concerned about. We want to make 
sure that policy performs and offers the access that has been 
guaranteed in that policy, and we are going to work together to 
make sure that happens, whether it is through the exchange, or 
whether it is outside of the exchange. Because the--all of the 
plans in the individual market and the small-group market have 
to meet the same standards, whether they are in the exchange or 
outside of the change. And we have got a lot of plans out 
there, a lot of carriers, and we offer some real opportunity 
for consumers.
    Mr. MCDERMOTT. Dr. Gottlieb talked about the fact that 
doctors might not get paid, or that somehow payments would be 
held back by insurance companies. Have you ever had a complaint 
to your office from a physician's office that the insurance 
company wasn't paying their bills?
    Mr. KREIDLER. We have had--Congressman McDermott, we have 
had lots of complaints about that over the years, well before 
the Affordable Care Act.
    Mr. MCDERMOTT. Really? Before ObamaCare?
    Mr. KREIDLER. Oh, way before ObamaCare.
    Mr. MCDERMOTT. Oh.
    Mr. KREIDLER. And that has always been an issue. And when 
we hear those complaints, and it is a fully regulated plan that 
we have authority over, we contact that company right away, and 
we make sure that they are living up to their promises that 
they are paying on those claims. If there is a problem out 
there, we are going to go after that carrier to make sure that 
they are complying. And, quite frankly, we have received a 
remarkable amount of good-faith work with the health insurance 
carriers in the State of Washington when we bring it to 
attention. Everybody makes mistakes. They can make mistakes as 
well as anybody else, and when they do, they are quick to make 
the correction of that.
    So I don't look forward to them holding back. Now, again, 
we are talking about a State-driven exchange. We didn't cede 
the power to the Federal Government. We said we wanted to make 
sure our plan worked to the benefit of Washington consumers, 
that it wound up being styled to what we are used to in the 
State of Washington, so we took control of it. We did not defer 
to the Federal Government. So it made a big difference.
    Mr. MCDERMOTT. Could I just ask you to talk a little bit 
about the change? In my understanding, insurance regulation has 
always been done at the State level. Federal Government has 
never put its hand into it before. Now we are putting our hand 
into it sort of--I don't know exactly how it feels or what it 
looks like. Tell me--I mean, some States clearly have insurance 
commissioners that aren't doing their job, but the clear--the 
question I have is what is it like to have us start telling you 
what to do?
    Mr. KREIDLER. Well, to some degree we have already had some 
of that because of ERISA and HIPAA and some of the other 
standards that were out there well before ObamaCare.
    We had some guidance from the Federal Government. When it 
came to regulation, you are absolutely right, Congressman 
McDermott, that we have been for the fully insured market the 
ones that have been in charge of this, so that we have been 
driving it at State level. So that hasn't--that is something 
that we are used to.
    As we look at the Federal involvement right now, it is one 
that provides some bottom-line guidance so that there aren't 
low-ballers out there, that consumers are protected; they get 
the services they want.
    Chairman BRADY. Thank you, Commissioner.
    Mr. Johnson.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    Dr. Gottlieb, you mentioned in your testimony it has been 
reported that the focus has been to fix the Web site 
registration process, but that means insurance--insurers are 
still getting faulty reports on individuals who believe they 
have signed up for coverage, but aren't actually enrolled.
    Yesterday the Texas Health and Human Services Commissioner 
sent a letter to Secretary Sebelius stating he has serious 
questions about the validity of the data we have received from 
CMS. While electronic account transfers have been delayed, CMS 
has provided States with spreadsheets of individuals the 
marketplace determined would be Medicaid or CHIP eligible as of 
January 2014. Our review of the spreadsheets for Texas found 
individuals with addresses from other States, including as far 
away as New York; fields that were left blank; and people who 
are already receiving Medicaid or CHIP.
    Given all the problems and mistakes that are still ongoing, 
how can the Federal Government force people to buy a product 
they don't want? And businesses have been given a year reprieve 
from this onerous law. Shouldn't individuals be treated fairly 
and be given a delay from this complicated mess as well?
    Dr. GOTTLIEB. Well, I am one who believes that at some 
point the Administration will announce that they are not going 
to enforce the individual mandate, and they will just wait 
perhaps until after the enrollment deadline. I find it hard to 
believe that they are going to enforce the penalty on people in 
a situation where it is, you know, nearly impossible in certain 
situations to sign up, and certainly difficult.
    So, yes, I don't think there should be an individual 
mandate. We should also keep in mind that since the data being 
transmitted to the plans is wrong, most of that--a lot of that 
revolves around determination of eligibility for the subsidies. 
So it is fair to assume that some of those subsidy calculations 
are wrong. And it is also fair to assume that you are more 
likely to enroll in a plan if the subsidy calculation is wrong 
in your favor than against you. And so there is going to be a 
percentage of people, and it could be potentially high, who 
were told they were eligible for subsidies and enrolled on the 
basis of that assumption where their subsidy calculations were 
wrong.
    It is unclear how that is going to be handled, whether that 
money is going to be clawed back, or there is going to be some 
kind of grace given for this year since the mistake is on the 
part of the Web site and the Federal Government. But I think it 
is fair to assume that--and who knows how big the number is--
that there is a certain percentage of people who enrolled who 
have wrong calculations.
    Mr. JOHNSON. Well, maybe we need a delay to figure it all 
out.
    Ms. Turner, I want to do just a simple comparison. Let us 
compare what we know about 2014 to what will happen in 2015. 
One, will premiums be higher or lower in 2015 than 2014?
    Ms. TURNER. I think we have heard that that greatly depends 
upon all the young, healthy people signing up for coverage and 
getting the 7 million enrolled. That looks increasingly 
unlikely. And I think if we start to see enrollments decline, 
you get--the exchanges become basically high-risk pools instead 
of the broader plan that you are going to see premiums only go 
up, and I think that is going to significantly impact 
enrollment in 2015.
    Mr. JOHNSON. Yeah. Well, will individuals have more or 
fewer choices of doctors?
    Ms. TURNER. And as Dr. Gottlieb has shown in his new study, 
across the--the one plan that he was able to get good data on, 
that we see that the--the choice of physicians is dramatically 
reduced, and the limited networks are really a result of trying 
to have so many benefits in the plan. But providers and 
especially hospitals are very limited.
    Mr. JOHNSON. In your opinion, will more or fewer insurers 
participate in the exchanges?
    Ms. TURNER. If I were an insurance company, I would be 
looking very carefully at this and thinking, if you didn't get 
in one of these exchanges, you are thinking, I am so glad. And 
I think they are going to go about it very carefully.
    Mr. JOHNSON. Walk softly and carry a big stick.
    Will insurers expand or decrease the number of counties 
where they offer plans?
    Ms. TURNER. We are starting to see much more not only 
limitations in the number of physicians and hospitals, but also 
geographic limitations in what the plans are offering. So I 
think you are going to continue to see more limits, fewer 
benefits, and ultimately higher costs.
    Mr. JOHNSON. Wow. Well, will the individual mandate be more 
or less popular as we go downstream?
    Ms. TURNER. There was a recent study just this week showing 
that the more that people knew about the law, the more 
unpopular it was. And I think a number of people don't 
understand the--the individual mandate. It is not being 
promoted by the Administration, and it is--the penalties are 
significant, and people feel it is of an affront to their 
freedom.
    Mr. JOHNSON. You bet.
    And will more or fewer employees--employers offer coverage 
for their employees.
    Ms. TURNER. If you are a big company, and you are looking 
at the possibility of paying a $2,000 fine per employee instead 
of $11,000 for employee health insurance, they are likely to 
have to drop coverage.
    Mr. JOHNSON. Thank you, ma'am. Thank you.
    Chairman BRADY. Thank you.
    Mr. Thompson.
    Mr. THOMPSON. Thank you, Mr. Chairman.
    Ms. Turner, you mentioned that some folks are going to be 
hit with more expensive and less attractive policies. What is a 
less attractive policy?
    Ms. TURNER. As Dr. Gottlieb described, the limit--more 
limited network, the hospitals----
    Mr. THOMPSON. The which?
    Ms. TURNER. More limited networks and the fewer number of 
doctors that are providing. There were a number of people that 
are saying even when they get on the exchange, they find to 
have to make a choice between the hospital that they have been 
going to or the doctor that they have been seeing. So the 
limitations on networks and the--I think they are also going to 
be very surprised at the high deductibles in many of these 
policies. The most affordable plans have deductibles of 3- and 
4,000----
    Mr. THOMPSON. So you weren't talking about what is covered; 
you weren't talking about preventive care, mental health, drug 
and alcohol addiction, all of the--all of the--the fact that 
they can't drop you for a preexisting condition. That is not 
what you were talking about as less attractive.
    Ms. TURNER. I am talking about the consumer's actual 
experience in accessing that care.
    Mr. THOMPSON. And tell me, you just responded to Mr. 
Johnson's question about whether or not insurance companies 
would want to get on the exchange. Why wouldn't an insurance 
company want to get--have access to that marketplace?
    Ms. TURNER. I think initially they felt that this would not 
only be something that they should do as insurance companies, 
insure people, but also that this was going to be a large new 
pool of potentially healthy people that they could get on 
their--on their plan. But they are finding now that the--the 
Web site is so difficult to get on and has been, that only----
    Mr. THOMPSON. Which--you mean the one in the 36 States that 
have tried to----
    Ms. TURNER. Well, no one has been able to sign up on the 
Oregon exchange either. A number of others are still having 
trouble. You--Vermont, Oregon, others.
    But just the risk pool that they are now seeing of people 
who are going to get on exchanges. As I said, I think that the 
exchanges could very well become high-risk pools, and the 
policies are not priced for that.
    Mr. THOMPSON. So the effort to discourage young people from 
signing up is having an effect as to whether or not people 
will--insurance companies will get on the exchange?
    Ms. TURNER. Well, the law itself really discourages young 
people by charging them more.
    Mr. THOMPSON. Thank you.
    Dr. Kreidler, thank you for being here and for your 
testimony. I was impressed with what I heard you say and what I 
have been able to read in regard to what Washington is doing. 
And I am from California, a State has had similar success. We 
have--we were out--California was, I think, the first State to 
go after setting up its exchange and to get everything in place 
so this would work.
    We have had over 80,000 people sign up already. Twenty-five 
percent of those who have signed up are young people between 
the age of 18 and 34, and I think that is important to note, 
and we are getting about 10,000 applications a day. So it is 
working pretty well in California. And when I talked to the 
insurance folks--one was in my office today--they think it is 
going to be only improving as time goes on. It sounds like you 
are having similar success in Washington.
    I would like to ask you about the authority that your 
office carries in the State of Washington. Are you able to 
negotiate prices for the policies that are on your exchange, or 
is that done in another arm of the government?
    Mr. KREIDLER. No, it is done through the Office of the 
Insurance Commissioner.
    Mr. THOMPSON. And so you regulate rates. What other 
regulatory authority do you have? If an insurance company--if 
there is a complaint about the cost of a policy, do you 
investigate that? And do you have some authority to regulate 
that?
    Mr. KREIDLER. Congressman Thompson, absolutely. We rely 
very heavily on getting consumer complaints about insurance 
companies' behavior in the market, so you can do the targeted 
examinations of those companies to correct where we see 
deficiencies, such things as making sure that if you have a 
policy that says we are going to cover certain specialties, we 
are going to make sure that they live up to those promises.
    The rates, when they are filed with us, they have to be 
shown that they are not excessive. If they are, we talk to the 
insurance company and are going to be reluctant to approve any 
rates that are going to prove otherwise.
    So, yes, we look at it very closely.
    Mr. THOMPSON. And you have used that authority; you have 
exercised that authority in the past?
    Mr. KREIDLER. Use it very extensively.
    Mr. THOMPSON. And how does that work? Does it work to the 
consumer's benefit?
    Mr. KREIDLER. Absolutely. The companies have learned that 
we play a strong ball game in the State of Washington. They 
come in with much better rates just to start with. We didn't 
have the major issues around medical loss ratios, MLRs, as has 
been talked about.
    Mr. THOMPSON. Do you have third-party interveners in your 
State laws? So can a third party intervene and request a review 
on your behalf?
    Mr. KREIDLER. Not in the State of Washington do we have 
third parties. I am the person who is the third party 
protecting consumers.
    Mr. THOMPSON. Thank you.
    Chairman BRADY. Thank you, Commissioner.
    Mr. Nunes.
    Mr. NUNES. Thank you, Mr. Chairman.
    Dr. Gottlieb, if you could, walk me through the process. 
Let's assume that I was able to log on to the Web site and it 
worked, and so in the last couple of weeks I have signed up. Do 
I receive an ObamaCare card in the mail? Or, like, what do I 
have for proof of insurance?
    That is what people really want. They want to carry a card 
around so that when they walk into the doctor's office January 
1st, they show them their card. So what am I receiving?
    Mr. GOTTLIEB. Well, there are not many people who we can 
ask. But presumably you are going to receive notification from 
the insurance company, just like you would in the individual 
market. And so I am sure there are some people who were able to 
get on early who have already received that notification, but a 
lot of people haven't.
    Mr. NUNES. But I am supposed to get a card, right?
    Mr. GOTTLIEB. Yes.
    Mr. NUNES. Most Americans carry a card.
    Mr. GOTTLIEB. Yes.
    Mr. NUNES. So do they have the cards yet?
    Ms. TURNER. I think that is going to have to come from the 
insurance companies.
    Mr. GOTTLIEB. Yeah, it will come from the insurance 
companies. But have they mailed them out yet?
    Mr. KREIDLER. I don't know if they have mailed them out yet 
or not.
    Mr. GOTTLIEB. I haven't heard of anyone, yeah.
    Mr. KREIDLER. Obviously, it would be a card that wouldn't 
be valid until the 1st of January.
    Mr. GOTTLIEB. But you would want it by now, right?
    Mr. NUNES. So let's assume that I do get this card before 
January 1st, I walk into the doctor's office, and I show them 
my card. Is that doctor going--do all the doctors have to 
accept my ObamaCare card?
    Mr. GOTTLIEB. No. I mean, you bring up a critical issue, 
which is it is very hard for a consumer right now, depending on 
the plan they are in, to find out what the network looks like. 
A lot of these plans haven't even made network information 
available to people who have enrolled.
    I think the only way certain consumers are going to find 
out what their network is, is to enroll in a plan, try to test 
it in January, and if they find out it is not good for them or 
their doctor doesn't take it, they can disenroll and enroll in 
a new plan before March. And I suspect you will see consumers 
doing that.
    This information isn't available. We looked hard for it.
    Mr. NUNES. So it is likely that I am going to walk into a 
doctor's office--Americans will walk into their doctor that 
they have went to for years and doctors are going to reject the 
insurance?
    Mr. GOTTLIEB. It is possible. I mean, presumably, you would 
hope that most Americans would check if their GP is going to be 
taking the new policy. But, certainly, you won't be able to do 
that with your full complement of providers.
    Mr. NUNES. But how are they going to check if they haven't 
received the card yet?
    Mr. GOTTLIEB. Call up the doctor's office, and hopefully 
the doctor knows if he is enrolled in the network.
    I mean, this is not easy; you are right. And, again, these 
plans are not, even to people after they have enrolled, making 
available the full network information yet. In a lot of cases, 
they don't have the networks yet. They haven't fully formed 
them. They are still putting them together.
    Mr. NUNES. Sounds like a lot of people aren't going to have 
insurance coverage come January 1st.
    Mr. GOTTLIEB. Yep.
    Mr. NUNES. Do you agree with that, Ms. Turner?
    Ms. TURNER. [Nonverbal response.]
    Mr. NUNES. Mr. Carlson, do you agree that a lot of people 
are not going to have insurance coverage that think they are 
entitled to it or were dropped off of their employer's plan?
    Mr. CARLSON. Well, I think the critical issue is, with the 
extension of the enrollment, people are going to wait longer to 
get the coverage than they would have otherwise.
    Mr. NUNES. Now----
    Mr. MCDERMOTT. Would the gentleman yield?
    Mr. NUNES. Mr. Kreidler, now, in Washington, everything is 
great; everybody has got their cards?
    Mr. KREIDLER. Congressman, they do not have their cards, 
but what they do have--and that will, of course, be through a 
private insurance company. But people are going to wind up 
going to any doctor; what they have an interest in is knowing 
whether they are in-network or not.
    And Dr. Gottlieb identifies, one of the challenges we have 
is making it easier for people to find out if their provider, 
the one that they rely on the most, which is often going to be 
a family practice provider, that that provider is in-network or 
not. And that information isn't as readily available right now, 
either through the Federal exchanges or, for that matter, even 
in the State of Washington, but we are working to correct that.
    One of the things we encourage people to do----
    Mr. NUNES. But you have 3 weeks left.
    Mr. KREIDLER. Well, it means calling the insurance company. 
If you have gone through the enrollment process and you have 
identified your insurance company, let's say it is a Blue Cross 
or a Blue Shield plan or whatever it is, you give them a call 
and say, hey, is my provider in-network for this particular 
plan, and they are going to communicate. If they contact the 
exchange, they are going to have information too, probably not 
as readily available as calling the insurer themselves, but 
people can find out.
    It is just a little bit more challenging right now. It is 
one of the glitches in the system that we are going to work out 
and make it a much more consumer-friendly----
    Mr. NUNES. So if I have a Washington State utopian Obama 
card, does that allow me to get into any doctor in Washington 
State, or are there going to be some that are going to reject 
the card?
    Mr. KREIDLER. Well, if you have an Obama card, you probably 
wouldn't get into any doctor's office, because they will all be 
private insurance companies. But if you come in with a private 
insurance company's card, you can go anyplace you want to, but 
if it is out of network, you are going to expose yourself to 
considerably more cost to you as an individual.
    It is important to make sure that when you go in, that you 
are going to maximize your benefits. And one of the ways you do 
that is to find out if you are in-network, and that is where 
you have the protections.
    Mr. NUNES. Thank you.
    I yield back.
    Chairman BRADY. Thank you.
    Mr. Pascrell.
    Mr. PASCRELL. Thanks, Mr. Chairman.
    Mr. Chairman, I just have to begin by taking exception to 
something that you said earlier to my good friend. You said 
that there was no plan B to correct the myriad of problems--you 
didn't use the word ``myriad''; that is my word--that exists 
with the ACA. And our panelists have defined some of those 
problems very nicely, and I think some of them are undeniable. 
Some of them need to be addressed beyond the rollout of the 
plan. We all know that.
    But it took us 6, 7 years to respond to Plan D back in 2005 
to make sure people who were paying premiums were getting some 
benefit. Remember? Between $2,200, $2,300, and $5,200, those 
people paid premiums, right, Mr. Carlson, Ms. Turner? They paid 
premiums and got no benefits. Remember that? Oh, it took us 6, 
7 years.
    Ms. TURNER. There was a coverage gap.
    Mr. PASCRELL. Mr. Chairman, here is what you said. You said 
that there was no plan B from the Obama Administration to 
correct these problems. I think some are legitimate concerns, 
and we should all have them.
    But, Mr. Chairman, you have no plan. In fact, if you 
watched the last 2 weeks, I see many of my good friends on the 
other side of the aisle scrambling to put a flawed erector set 
of disjointed proposals together, many of which have already 
been rejected. So we are still waiting to see your plan A.
    I don't want to minimize these problems, as I said. I voted 
for the Affordable Care Act. I am proud of it. I want the law 
to succeed.
    And, remember, we came together after 2005, and we worked 
together across the aisle even though many of the folks on the 
Democratic side voted against it. And the reason why I think it 
succeeded over years is that we worked together.
    You don't want to hear that. You don't want to hear that we 
worked together. We had the choice--we had the choice to turn 
our backs, go back to our districts, and tell seniors this was 
all baloney. We chose not to do that, Mr. Chairman. We chose to 
use the legislation to help educate the people as to what the 
benefits were from Plan D reform. That is what we chose to do. 
You chose not to do that.
    In fact, we have example after example--and I am glad our 
good friend from Washington is here today. The fact is that 
since October the 1st, there have been improvements made to the 
Web site. Some States have shown, like Mr. Kreidler's home 
State of Washington, once these technical problems are 
corrected, it doesn't mean the other problems go away, but it 
is a smoother sail to the object.
    Everyone wants the law to succeed. Or do they? My friends 
on the other side, while they may feign concern now, have been 
actively working to make healthcare reform fail. And you can't 
deny that, Mr. Chairman. You just can't deny that. You want to 
deprive millions of Americans of health insurance. And I don't 
think you care any less than I do about those millions of 
people, but let's be straight about the whole situation.
    Our Governor in our great State of New Jersey, the Ranking 
Leading Member now in the polls that he is going to be the next 
President of the United States, he accepted the Medicaid money 
from the Federal Government. He got it half-right.
    But I used to be a teacher, and in my classes you didn't 
get a passing grade for doing the bare minimum. The Governor 
refused to set up a State marketplace--we need to look at every 
one of these States--and has left millions of Federal dollars 
in outreach and education funding unspent.
    If you remember, in the ACA, $3.6 billion in Federal money 
for grants. New York State, which has a similar population in 
terms of the target here as New Jersey, New York State received 
$369 million. Imagine a Governor turning that down to inform 
and educate the people in his State on something as dramatic as 
Social Security and Medicare, to at least inform the folks--at 
least inform the folks what they should be doing and what their 
options are. It would seem to me to be fair.
    I ask you, Mr. Chairman, as a leader within your party and 
on this great Committee, come over, help us make it right----
    Chairman BRADY. All time has expired.
    Mr. PASCRELL [continuing]. Or give us your plan A.
    Chairman BRADY. I think the witnesses got off easy on that 
question.
    Mr. PASCRELL. Yeah, I didn't get to them.
    Chairman BRADY. Mr. Gerlach is recognized.
    Mr. PASCRELL. Are we going to have a double round? Can we 
come around again, Mr. Brady?
    Mr. GERLACH. Thank you, Mr. Chairman.
    Dr. Gottlieb, in your testimony, on page 8, under the 
conclusion section, you state that, ``for every consumer that 
is made better off under this scheme, there will be other 
consumers that are harmed.''
    And then you go on to state that ``these people who will 
make out worse under ObamaCare--the ObamaCare losers--seem to 
be getting shorter shrift in political discussions'' that are 
going on here. ``Many of these families are solidly middle-
class, and many struggle financially.''
    Can you expand on that a bit more? Who will be the 
ObamaCare losers under the current scenario of the existing 
law?
    And is there any way to calculate, for every one person 
that ends up with an insurance policy that he or she did not 
have before, how many are actually getting worse policies 
relative to what they want as a citizen, as a consumer, 
relative to what they have to pay in a premium each month and 
what the deductible is going to be and whether the policy 
provides coverage they don't even want or need?
    How many of the folks out there are going to end up being 
losers because they are going to be worse off compared to every 
one person that will have a better situation?
    Mr. GOTTLIEB. Well, all great questions. It is really hard 
to quantify. It depends on the State you are in, certainly. But 
you can make an assumption that many of the people who are 
losing their coverage and are going to be forced into the 
exchanges are being disadvantaged in some way. Certainly, they 
made a conscious decision to purchase a certain style of plan 
in the individual market. They are being forced into the 
exchange and buying a plan that they didn't necessarily want.
    Now, for many of those folks, they are going to encounter 
higher costs. In certain States, they might see comparable 
costs or lower costs, but those are the exceptions. Those 
happen to be States that had a lot of insurance regulation 
previously, and now, you know, the sort of exchange environment 
is comparable to what they were experiencing. But most people 
are going to see higher costs and have to pay for benefits that 
they didn't necessarily make a decision that they wanted.
    We have done some, you know, rough math at the American 
Enterprise Institute, and, generally speaking--and this is a 
sort of a crude statement, blanket statement--if you are above 
250 percent of the Federal poverty level, chances are you are 
going to be paying more in the exchange, even with the benefit 
of the subsidies. The subsidies won't be rich enough to offset 
the higher costs.
    Mr. GERLACH. And how much is 250 percent of Federal 
poverty? About how much is that in income?
    Mr. GOTTLIEB. $30,000 for an individual, $60,000 a year in 
annual income for a family of four.
    So anyone above that level, there is a high probability 
that they are going to be in a more difficult financial 
situation, notwithstanding the fact that some people might 
argue, well, they are getting more benefits. But they are 
getting benefits they didn't necessarily want.
    You know, this goes right up through the continuum. So you 
think about, for example, a family of four earning $95,000 a 
year forced off their employer-provided coverage into the 
exchange, that family is now using after-tax dollars to buy a 
policy in the exchange. If they buy a silver plan in the 
exchange, they might be looking at a situation where they are 
spending almost 25 percent of their after-tax income on health 
care. Now, clearly, they are not going to be able to do that. 
But that is a lot of hardship.
    And I think, you know, we are worried about the people at 
the lower income bands, but we shouldn't give short shrift to 
the people who are middle-income, higher-middle-income, who are 
also being badly hurt here.
    Mr. GERLACH. Mr. Carlson, with your actuarial background, 
what is your thought on that question? Who are the ObamaCare 
losers in all of this process?
    Mr. CARLSON. Well, I think if you look at the--from a 
premium rate perspective, and that is kind of the way I look at 
it, you have made market reforms that have kind of changed how 
the private insurance, healthcare insurance, is being funded.
    Basically, with the essential benefits, you have required 
that all policies cover maternity and all policies cover 
prescription drugs. So, you know, if an individual doesn't need 
those benefits, they are still going to share in the cost of 
that. You know, from an actuarial perspective, that is a policy 
decision: How do we want to spread the cost of health care 
across individuals who purchase health care? You know, tell me 
how you want to do it, and the actuary will price it.
    But, you know, to the extent there are individuals who 
don't need those benefits, they are going to be paying for 
something that, you know, is spreading the cost to somebody who 
doesn't need it beyond what they would actually use for 
benefits.
    Mr. GERLACH. Congressman Kreidler, if you look at it from 
the perspective that we are going to have losers in this entire 
system once it is implemented, and then you look at the fact 
that the enactment has 21 new taxes in it that will raise over 
a trillion dollars over 10 years and take that out of the 
private-sector economy, you will have a whole new governmental 
regulatory regime that will impact physicians and other 
healthcare providers, and at the end of all that, according to 
the Congressional Budget Office, you will still have about 30 
million uninsured people in the United States, which is around 
the same figure we started this discussion with back in 2008 
and 2009, how can any rational person support the Affordable 
Care Act?
    Mr. KREIDLER. What I am seeing with the current insurers 
right now, I am not seeing the kind of rate problems that are 
being described here. In the King County metropolitan area, or 
King County, the most populated county in the State of 
Washington, we went through one of the major carriers there. 
They had 31 plans. We found that all 31 plans would have wound 
up--only 1 of the 31 plans would have actually wound up costing 
more.
    I think if you ever tried to identify some people that 
would perhaps see the price shock that comes along, it would be 
somebody that is relatively healthy, that doesn't care about 
having prescription drug coverage, doesn't care about 
pharmaceutical coverage or maternity coverage and things of 
that nature. But, you know----
    Chairman BRADY. Commissioner, I apologize. All time has 
expired by a long way.
    Mr. GERLACH. Thank you.
    Chairman BRADY. So Dr. Price.
    Mr. PRICE. Thank you, Mr. Chairman. And I want to thank you 
for holding this hearing.
    The President and the Administration apparently came out 
yesterday and said they were going to come out every single day 
for the next 3 weeks with a new benefit of the Affordable Care 
Act. And so having this hearing is incredibly important because 
the American people know that there is not a new benefit to 
this law every single day.
    And yet he said something yesterday that he says virtually 
every single time he stands up, and that is that there are no 
other ideas. ``If somebody has got a better idea, then come 
talk to me.''
    Well, Mr. President, we have had a better idea for over 
three Congresses. H.R. 2300 is the bill that gets patients 
covered, solves the insurance challenges, saves hundreds of 
billions of dollars, and doesn't raise taxes by a dime, and 
doesn't put Washington in charge of health care.
    So, Mr. President, here we are. We have a better idea. So 
give me a call. We have asked, haven't heard a word. So my 
phone number in the office, 225-4510, Mr. President. Thank you. 
Thank you.
    The problem is the President's plan now, as we heard 
yesterday, is to go on offense and blame the Republicans. Well, 
there is a great plan. If this was pension care or worker's 
comp or even unemployment insurance, maybe that sounds, 
politically, like what ought to be done at the White House, 
but, Mr. Chairman, this is people's lives.
    I spent over 20 years taking care of patients. People hurt 
when they can't get medical care. People's health care is 
compromised when they can't get medical care. People lose lives 
when they can't get medical care. This is serious stuff.
    And so it is not just distressing, to quote my friend from 
Washington State, it is cavalier and arrogant to have the 
Administration do this. It is cruel and irresponsible to have 
the Administration move in this direction.
    We talk in Washington-speak here a lot, and so I want to 
drill down a little bit, if I may, with some of you on the 
panel. We have talked about ``coverage gap.'' What does that 
mean?
    Dr. Gottlieb, what does ``coverage gap'' mean?
    Mr. GOTTLIEB. Quite simply, people might not be covered, 
they might not have insurance.
    Mr. PRICE. They don't have insurance, they don't have 
insurance. They had it before, they don't have it now. That is 
a coverage gap. That means you can't see a doctor, you can't go 
to a hospital and have the procedure or the service covered.
    What about ``back end''? We have heard, ``The back end 
hasn't been completed.'' Sounds like a medical term.
    But, Dr. Gottlieb, what is ``back end''? What does that 
mean?
    Mr. GOTTLIEB. Well, that would be my jargon again. That is 
a reference to the systems to allow payments to the insurance 
companies and to the providers. So the front end, people can 
enroll, but then all the stuff that should happen after that 
hasn't been built out yet.
    Mr. PRICE. So it means doctors and hospitals and other 
providers aren't yet--there is no mechanism to pay them yet for 
the services they provide?
    This ties in to a committee hearing in another committee a 
couple weeks ago that 40 percent of the Web site wasn't 
completed, that they haven't even done it, haven't even done 
it.
    That is the back end. So, folks at home listening, what 
that means is your doctor won't get paid. If your doctor 
doesn't get paid, you know what happens. He or she can't see 
you.
    ``Network information.'' Mr. Kreidler used ``network 
information,'' ``We didn't have the network information 
complete.''
    Ms. Turner, what is ``network information''?
    Ms. TURNER. Well, one would assume that that is the 
networks of doctors and hospitals that people would be able to 
see if they were to sign up for various health plans.
    Mr. PRICE. So we are asking the American people to make a 
decision about the most important thing in their lives, their 
health care for themselves and for their family, and we don't 
even have the information available to them to allow them to 
make a responsible decision. You talk about cruel and 
irresponsible.
    Ms. Turner, another question was asked of you about young 
people being discouraged to sign up, and you weren't allowed to 
continue your answer. I think you started, ``The law 
discourages,'' and then you were cut off. Would you expand on 
why the law discourages young people?
    Ms. TURNER. I think this is such an important issue, and it 
shows that the law needed to be thought through better because 
young people were the very people that the exchanges need to 
attract to the plan, because they are being told they have to 
pay a higher actuarial price for their health insurance in 
order to be able to have older people pay less.
    So you need to have them in, but they are figuring this 
out, first of all. If they are young and healthy, they are not 
going to spend 3 or 4 days, a week, trying to get through a Web 
site for insurance when they find that they are going to have 
to pay more for it than their actuarial rates.
    Mr. PRICE. So a huge financial disincentive----
    Ms. TURNER. Yes.
    Mr. PRICE [continuing]. For young, healthy people to sign 
up. And that is in the law. Republicans didn't make that up.
    Ms. TURNER. Right.
    Mr. PRICE. That is in the law.
    So, Mr. President, we have a better idea, H.R. 2300. I look 
forward to your call.
    Thank you.
    Chairman BRADY. Thank you.
    Mr. Smith is recognized.
    Mr. SMITH. Thank you, Mr. Chairman.
    And thank you to our witnesses today.
    I know that as we deal with what has been noted by many as 
a very serious issue, I hope that we can bring about a system 
that is patient-centered, where the government doesn't stand in 
the way of patients and their care. And some patients find care 
in different ways or at different levels, but the patients, I 
hope, would be in charge.
    And so I am very concerned on the very topic that was just 
mentioned, about the need actuarially for younger, healthier 
folks to sign up who were not previously signing up, to spread 
that risk, and yet there are indications that these younger 
folks are not signing up.
    Commissioner Kreidler, could you disagree with that? Is 
that not the case?
    Mr. KREIDLER. Congressman, I would agree right now that we 
are not attracting as many of the young and the healthy that 
really need to be a part of the Affordable Care Act because 
insurance only works if you have good risk and bad risk. And if 
they have good risk, you need to balance it out. That is the 
only way insurance works.
    Mr. SMITH. And do you think that those targets are being 
met?
    Mr. KREIDLER. The targets currently are not being met. And 
one of the challenges that make it more difficult is all of the 
controversy around the Affordable Care Act. Such things as 
cancelled policies and the like only wind up offering more 
distraction. And we need to make sure that people are 
incentivized, realize they have an obligation for personal 
responsibility, and do the signup for health insurance so they 
don't have to have their rates paid for, effectively, by other 
people who are insured.
    Mr. SMITH. Mr. Carlson, if these folks aren't signing up, 
ultimately, what is at risk?
    Mr. CARLSON. Well, I think what is at risk is the future of 
that risk pool. The premiums that were set for 2014 assumed a 
certain mix of younger and older individuals. If that mix is 
not met, you have an issue that the insurance company is not 
going to be collecting enough premiums relative to the claims 
they expected. And that also is going to drive their pricing 
for 2015.
    So, you know, unless they can see that the risk pool will 
change to be a more balanced risk pool, they have to build in 
to their pricing the assumption that they are not going to be 
able to enroll those younger individuals and are going to have 
to increase their premiums to reflect that difference.
    Mr. SMITH. Are there any numbers that you could maybe point 
to in terms of what expectations--I mean, it is probably 
difficult to do, but any rule of thumb?
    Mr. CARLSON. You know, I think at this point it is way too 
early to make any judgment. I think it is certainly a positive 
number and not a negative number; I will put it that way.
    Mr. SMITH. Okay.
    Well, I just have such extreme concern that if young people 
weren't signing up before and they will be faced with a higher 
premium yet because of all of the new mandates and the 
government, and the heavy hand of government, I would add, 
intervening, that will result in a higher premium, I can't 
imagine that human beings would be more anxious to sign up for 
that, even with some of the penalties in place.
    Commissioner Kreidler, do you see any objection there?
    Mr. KREIDLER. You know, one is that there is the 
opportunity up to the age of 26 of staying on your parents' 
policy. The other is that there are catastrophic plans up to 
the age of 30 that are much more affordable that are possible 
for younger and healthier individuals to sign up for.
    So there are some options out there to help bend that cost 
curve down for the individual--cost curve from the standpoint 
of how much it costs them.
    But nobody is immune from bad luck. A good friend wound up 
with her son having a skiing accident in Utah and wound up 
costing her something like $20,000 because of a broken leg, and 
he didn't have health insurance. Well, mom went out there to 
pay for it. Now, it is going to be easier for her to make sure 
that he has reasonable coverage than it has been in the past.
    But, yes, it means exhibiting personal responsibility so 
that we work to avoid the fact that, if you wind up with bad 
luck, you don't have to cost-shift to other people.
    Mr. SMITH. Okay. Thank you.
    I will yield back.
    Chairman BRADY. Thank you.
    Mrs. Black.
    Mrs. BLACK. Thank you, Mr. Chairman.
    I want to go to the topic of security.
    And so, Ms. Turner, this question is going to be for you. 
We are learning that HHS never built security into the Web 
site. As a matter of fact, there was a top security expert 
yesterday on CNBC that stated, and I quote, ``Putting your 
information on there is definitely a risk,'' and he was talking 
about the Web site.
    As a matter of fact, there was a piece on there that 
actually said, and I paraphrase, that there was no expectation 
of security of your information. It has since been removed from 
the Web site. I don't know that we can be confident now that 
something has changed since the removal of that.
    But is it fair to force people to use this Web site, the 
individual mandate that forces people to buy insurance that 
maybe they don't want and to expose them to the fear of having 
their most personal information hacked? Do you think that would 
be a concern?
    Ms. TURNER. That is a huge issue, and it is yet another 
deterrent for people to go on to the Web site. I am not an IT 
expert, but I certainly have read--a number of them have said 
that, even with this last push, this last row of fixes, that 
they did nothing to improve the security of the information 
that people are required to put on this Web site.
    This is a huge amount of personal information that people 
are required to disclose in order to see what subsidies are 
available, et cetera, as well as ultimately credit card 
information, bank account information. And if hackers can so 
easily get at a system, it is yet another deterrent from people 
enrolling in this coverage. I think that needs to be--that has 
to be a priority.
    Mrs. BLACK. Thank you. And I would say, given the many 
problems that have already been identified, that this may be 
another one that would indicate there is a reason for a delay 
in the individual mandate, as there was for an employer delay.
    Mr. Kreidler, I just want to go to you because you have 
built a Web site. And what did you do to ensure that there was 
security information on your Web site?
    Mr. KREIDLER. We had a number of protocols that were 
required of us. One, even receiving the Federal grant was there 
an obligation to be able to demonstrate that this information 
would be treated confidentially. And going forward, we had an 
obligation to make sure that the system operated.
    But, you know, all Web sites--I mean, we have certainly 
seen it with some of the major Web sites in this country where 
there have been compromises that have taken place, private Web 
sites that have had problems with personal information. I think 
it is an ongoing obligation and a challenge in the new era of 
Web sites and the kind of information that can be accessed, is 
to build in as much security as possible.
    Mrs. BLACK. So you say that, in order to receive the 
government grant to build the Web site, you had to ensure that 
you would use, I would say, probably standards that are 
accepted within the industry to ensure that, such as the end-
to-end testing. Did you do end-to-end testing on your Web site?
    Mr. KREIDLER. We did do testing. I wish we would have done 
more testing, just from the consumer perspective more than the 
privacy issue.
    But part of this is, even though we have our Web site at 
the State of Washington level, you have the Federal hub that 
you also interact with, which goes to a lot of the more 
critical personal information that you are describing, whether 
it is IRS information for eligibility or whatever. So it is a 
complex system, and confidentiality is something that we take 
very seriously.
    Mrs. BLACK. Well, and thank you for that. And I would say, 
given the fact that the Federal Government required you to use 
industry standards to ensure that you did end-to-end testing 
and to ensure the folks that are using your Web site, that they 
could be confident in putting that material in, that at least 
you did all you could to protect them, that is certainly a 
disappointment, that the Federal level did not follow those 
same standards. Because we know that they did not do end-to-end 
testing. And so this is a big concern.
    With the little bit of time that I have left, verification, 
income verification, has been something that I have been very 
concerned about. Because the two planks of the ACA was that if 
someone did not have employer-sponsored insurance, they could 
apply, and when they applied, we would have to verify income to 
be sure that their income was at a level where they were 
eligible for these tax credits.
    We learned yesterday that the Inspector General for the Tax 
Administration--and I quote: ``The IRS's existing fraud-
detection system may not be capable of identifying the ACA's 
refund fraud or schemes prior to the issuance of tax return 
funds.'' So now we have another situation that was not set up 
or being followed, where we don't know how much fraud is going 
to take place here.
    So thank you very much, Mr. Chairman.
    Chairman BRADY. Thank you.
    Mr. Reichert is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman. Thank you for 
allowing me to be a part of this hearing and pose some 
questions.
    And I would feel a little bit guilty, Mr. Kreidler, if I 
didn't attend--I am not on the healthcare Subcommittee. I now 
am on Human Resources and Trade. But I think, as a fellow 
Washingtonian, I wanted to be here, along with Jim McDermott 
and yourself. So thank you for coming.
    Thank all of you for your testimony.
    And I know you are proud of the product, and I know you put 
a lot of hard work into the Washington State exchange system, 
but I just want to be here to bring a little bit of reality to 
it. And I think you have touched on some of those things, but I 
want to highlight some of the issues that we have had.
    You know, my good friend from New Jersey has said, look, 
you know, we are looking for this to work. And what we want, 
though, really, is quality health care, affordable health care. 
We want access, and we want the freedom to choose. And I think 
that, in the ObamaCare plan, which we oppose because it hasn't 
lived up to any of those promises, in our opinion--that is why 
we are working to correct this. Because these are the things we 
should all be--it is not just about making the law work. These 
are the things that we should be after, right, for our 
constituents.
    So I know you are proud of your work and proud of the fact 
that over 176,000 people have enrolled in the Washington 
exchange program. But out of those 176,000, 158,000 of those 
are Medicaid enrollees; only 18,000 are individual enrollees.
    And isn't it true that if that number doesn't go up by 
2015, that the health insurance providers will have to increase 
their premiums for the losses that they are going to incur if 
they don't get those individual enrollments up?
    Mr. KREIDLER. It is an ongoing concern because we obviously 
want to get as many people enrolled through qualified health 
plans through the exchange, people who will be eligible for 
subsidies and some that are not eligible for subsidies also 
signing up for plans.
    Mr. REICHERT. But isn't it true, though, sir, that premiums 
will probably go up if those numbers don't rise?
    Mr. KREIDLER. You know, as Mr. Carlson has pointed out----
    Mr. REICHERT. Is that a ``yes''?
    Mr. KREIDLER. As an actuary, the answer is it is too early 
to say. Because you are only going to have about a quarter of a 
year in order to make those determinations.
    Mr. REICHERT. Okay.
    Mr. KREIDLER. There are a lot of other pressures that 
apply, such as market share and competition, that are going to 
drive insurance companies that help to hold down the rates.
    Mr. REICHERT. I agree that there is some time yet, but it 
looks like, from the information that we have been able to 
gather, the premiums will go up if those enrollments don't go 
up.
    The other issue is the 8,000 people who had a subsidy 
issue. They enrolled in programs, discovered that their 
subsidies were incorrectly calculated. I think you are trying 
to address that problem. But once they have discovered that 
their subsidies are less than what they supposed in the first 
place, now their premiums go up, and they have insurance plans 
that they didn't want or it doesn't provide the service that 
they need. I think that is a huge issue.
    Eight thousand people--you talked a little bit earlier 
about glitches. Glitches mean people to me. That is 8,000 
people that are in a glitch. That needs to be fixed. Two 
hundred and ninety thousand people in Washington State received 
notices that their insurance plans were cancelled--290,000 
people--in this glitch.
    The President said, after he made these promises, you can 
keep your healthcare plan, which was really not totally 
truthful, finally came out and said, you can keep your 
healthcare plan. The House of Representatives here in the 
United States Congress passed a law that said you can keep your 
healthcare plan. Harry Reid did not bring that bill to the 
Senate floor.
    You decided, sir, to separate yourself from the President 
on that request and decided not to allow those 290,000 people 
to keep their health insurance. Did you speak to any of those 
health insurance carriers to see whether or not they could 
continue their coverage before you made that decision for those 
290,000?
    Mr. KREIDLER. The answer to that, Congressman, is, no, I 
did not.
    Mr. REICHERT. Why not?
    Mr. KREIDLER. I regulate. I regulate the----
    Mr. REICHERT. Why did you not contact those insurance 
companies?
    Mr. KREIDLER. We had a statement from the American Health 
Insurance Plans, AHIP, that was very clear that they were 
distressed by it.
    The irony of it is they were distressed about what the 
President proposed, but they privately would have said that the 
Upton measure that passed here----
    Mr. REICHERT. Well, before my time runs out----
    Mr. KREIDLER [continuing]. Would have been much more----
    Mr. REICHERT. Before my time runs out, Mr. Kreidler, I want 
to make a couple more points.
    Soon to hit will be the employer mandate--the employer 
small businesses association plans, they are going to get their 
notices for cancellations. I know that some already have.
    The other thing that really bothers me is this narrowing 
network issue that you spoke of earlier in your testimony. 
Look, we have plans, and only one insurance company covers 
Cancer Alliance, Children's Hospital, University of 
Washington's Hospital----
    Chairman BRADY. All time has expired.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Chairman BRADY. No, thank you, Mr. Reichert.
    First, let me recognize Dr. McDermott for a unanimous-
consent request.
    Mr. MCDERMOTT. Mr. Chairman, thank you.
    I ask unanimous consent that we enter into the record a 
letter from the Association of Washington Healthcare Plans 
dated December 2nd, 2013.
    It responds directly to what Mr. Reichert is saying. It 
says: Accordingly, if the Administration of Congress chooses to 
make additional policy changes in the ACA, we ask that you 
advocate for allowing States with a functioning State-based 
exchange like Washington to continue with implementation as 
currently required under ACA.
    Chairman BRADY. Right. The time----
    Mr. MCDERMOTT. The insurers in Washington State ask him not 
to make the change.
    Chairman BRADY. Thank you.
    Without objection.
    [The information submitted by the Honorable Jim McDermott 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman BRADY. One, I would like to thank our witnesses 
for their testimony today.
    There are a lot of concerns about this law. A lot of 
families and patients and local doctors have concerns. We are 
going to continue. I think your testimony was insightful, your 
answers were thoughtful, we think, I think, very helpful in 
this whole discussion. We will continue to do oversight, 
vigorous oversight, over this law for Republicans and Democrats 
to be able to make sure we know what that impact is.
    As a reminder, any Member who wishes to submit a question 
for the record will have 14 days to do so. So if any questions 
come your way, I would ask that the witnesses respond in a 
timely manner, as I know you will.
    With that, this Subcommittee is adjourned.
    [Whereupon, at 11:44 a.m., the Subcommittee was adjourned.]

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