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

       UNAFFORDABLE: IMPACT OF OBAMACARE ON AMERICANS' HEALTH INSURANCE
                                    PREMIUMS

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

                                    HEARING

                                   BEFORE THE

                             SUBCOMMITTEE ON HEALTH

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 15, 2013

                                   __________

                               Serial No. 113-17

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                                     ______

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                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman
    RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
    JOE BARTON, Texas                      Ranking Member
      Chairman Emeritus                  JOHN D. DINGELL, Michigan
    ED WHITFIELD, Kentucky                 Chairman Emeritus
    JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
    JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
    GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
    LEE TERRY, Nebraska                  ANNA G. ESHOO, California
    MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
    TIM MURPHY, Pennsylvania             GENE GREEN, Texas
    MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
    MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
      Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
    PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
    STEVE SCALISE, Louisiana             JIM MATHESON, Utah
    ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
    CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
    GREGG HARPER, Mississippi            DORIS O. MATSUI, California
    LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin
    BILL CASSIDY, Louisiana                  Islands
    BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
    PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
    DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
    CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
    MIKE POMPEO, Kansas                  PETER WELCH, Vermont
    ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
    H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
    GUS M. BILIRAKIS, Florida
    BILL JOHNSON, Missouri
    BILLY LONG, Missouri
    RENEE L. ELLMERS, North Carolina
                             Subcommittee on Health

                         JOSEPH R. PITTS, Pennsylvania
                                     Chairman
    MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
      Vice Chairman                        Ranking Member
    ED WHITFIELD, Kentucky               JOHN D. DINGELL, Michigan
    JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
    MIKE ROGERS, Michigan                LOIS CAPPS, California
    TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          JIM MATHESON, Utah
    PHIL GINGREY, Georgia                GENE GREEN, Texas
    CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
    LEONARD LANCE, New Jersey            JOHN BARROW, Georgia
    BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin
    BRETT GUTHRIE, Kentucky                  Islands
    H. MORGAN GRIFFITH, Virginia         KATHY CASTOR, Florida
    GUS M. BILIRAKIS, Florida            JOHN P. SARBANES, Maryland
    RENEE L. ELLMERS, North Carolina     HENRY A. WAXMAN, California (ex
    JOE BARTON, Texas                        officio)
    FRED UPTON, Michigan (ex officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Joseph R. Pitts, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................     1
        Prepared statement...........................................     3
    Hon. Henry A. Waxman, a Representative in Congress from the State
      of California, opening statement...............................     4
    Hon. Michael C. Burgess, a Representative in Congress from the
      State of Texas, opening statement..............................     5
    Hon. Phil Gingrey, a Representative in Congress from the State of
      Georgia, opening statement.....................................     6
    Hon. Lois Capps, a Representative in Congress from the State of
      California, opening statement..................................     7

                                   Witnesses

    Douglas Holtz-Eakin, Former Director, Congressional Budget Office     9
        Prepared statement...........................................    11
    Wendell Potter, Senior Analyst, The Center for Public Integrity..    18
        Prepared statement...........................................    20
    Christopher Carlson, Actuarial Principal, Oliver Wyman...........    29
        Prepared statement...........................................    31

                               Submitted Material

    Study entitled, ``Why the ACA's Limits on Age-Rating Will Not
      Cause `Rate Shock': Distributional Implications of Limited Age
      Bands in Nongroup Health Insurance,'' March 2013, Urban
      Institute, submitted by Mr. Pallone............................    79
    Article entitled ``Analysis: Mass. individual health premiums
      highest in nation,'' August 9, 2011, Boston Herald, submitted
      by Mr. Burgess.................................................    90

       UNAFFORDABLE: IMPACT OF OBAMACARE ON AMERICANS' HEALTH INSURANCE
                                    PREMIUMS

                                  ----------

                             FRIDAY, MARCH 15, 2013

                      House of Representatives,
                                Subcommittee on Health,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 9 a.m., in room
    2123, Rayburn House Office Building, Hon. Joseph R. Pitts
    (chairman of the subcommittee) presiding.
        Present: Representatives Pitts, Burgess, Hall, Whitfield,
    Shimkus, Murphy, Blackburn, Gingrey, Lance, Cassidy, Guthrie,
    Griffith, Bilirakis, Ellmers, Pallone, Engel, Capps, Green,
    Butterfield, Barrow, Christensen, Sarbanes, Waxman (ex
    officio).
        Staff Present: Clay Alspach, Chief Counsel, Health; Matt
    Bravo, Professional Staff Member; Paul Edattel, Professional
    Staff Member, Health; Steve Ferrara, Health Fellow; Julie Goon,
    Health Policy Advisor; Debbee Hancock, Press Secretary; Carly
    McWilliams, Legislative Clerk; Katie Novaria, Legislative
    Clerk; Monica Popp, Professional Staff Member, Health; Andrew
    Powaleny, Deputy Press Secretary; Chris Sarley, Policy
    Coordinator, Environment and Economy; Heidi Stirrup, Health
    Policy Coordinator; Jeff Baran, Minority Senior Counsel; Alli
    Corr, Minority Policy Analyst; Elizabeth Letter, Minority
    Assistant Press Secretary; Karen Nelson, Minority Deputy
    Committee Staff Director for Health; Roger Sherman, Minority
    Chief Counsel; and Matt Siegler, Minority Counsel.

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

        Mr. Pitts. The subcommittee will come to order. The chair
    recognizes himself for 5 minutes for an opening statement.
        During the 2008 campaign and run-up to passage of The
    Affordable Care Act in March of 2010, President Obama
    repeatedly promised the American people that their healthcare
    premiums would go down by an average of $2,500 before the end
    of his first term in office. Unfortunately, he broke that
    promise. In fact, Americans' premiums have already risen by
    more than $3,000, and the expensive part of the ACA hasn't even
    been implemented yet.
        It is basic common sense that if you require individuals to
    buy a one-size-fits-all government-mandated health plan that
    covers everything, rather than allowing individuals to pick the
    plan that best fits their needs, choice will be limited, and
    premiums will rise. When Obamacare adds mandatory benefits,
    regulations like guaranteed issue and community rating, and new
    taxes and fees on insurance plans, premiums will only grow more
    unaffordable for Americans, so unaffordable, in fact, that the
    authors of the law decided the only way to get people to buy
    health coverage was to force them to buy it or face a fine from
    the IRS.
        Now, my friends on the other side of the aisle will point
    out that the ACA includes subsidies to help individuals buy
    these more expensive health plans, and they are correct. More
    than $1 trillion in subsidies is available for this purpose.
    However, households earning as little as $46,000 will be
    ineligible for premium assistance. Even after receiving
    subsidies, Americans earning as little as $25,000 will still
    pay more for their health insurance than they would if the ACA
    had not been enacted.
        Making low-income and everyday Americans pay more for
    private health coverage is not health reform. It is making
    their life harder at a time when our fellow citizens face
    sluggish economic growth, slow job creation and little
    disposable income.
        I recommend to all of you a report released last week by
    Energy and Commerce majority staff entitled ``The Price of
    Obamacare's Broken Promises: Young Adults and Middle-Class
    Families Set to Endure Higher Premiums and Unaffordable
    Coverage.'' The report compiles data from over 30 studies and
    analyses that examine the effect of Obamacare provisions on
    healthcare premiums in the individual and small-group market.
    It also includes a State-by-State analysis of estimated
    increases in individual market premiums that can be directly
    attributed to Obamacare.
        My home State of Pennsylvania can expect to see premiums in
    the individual market rise about 39 percent. States such as
    Arizona, Arkansas, Georgia, Idaho, Indiana, Iowa, Kentucky,
    Missouri, Ohio, Oklahoma, Tennessee, Wisconsin and Wyoming
    could see individual market premiums rise as much as 100
    percent or higher due to the Affordable Care Act.
        The increases for young adults in the individual market are
    much higher. One analysis estimates that 80 percent of young
    Americans earning over $16,000 will pay more for their coverage
    once the law is fully implemented than they pay today. And we
    don't have to rely merely on estimates of what is going to
    happen to premiums; many of the provisions of Obamacare, such
    as an individual mandate, guaranteed issue and community
    rating, have been tried before. Premiums skyrocketed, choice
    was limited, and these Obamacare-style reforms made it harder
    to find affordable coverage.
        In today's economy, American families simply cannot afford
    to pay higher out-of-pocket health costs than they would if
    Obamacare had never been enacted. Our young people, many of
    whom cannot find jobs, cannot afford triple-digit increases in
    their health premiums. A central promise of the an Affordable
    Care Act is that health care would be more affordable under the
    law. For many middle-class families and young adults, that
    turns out to be a broken promise.
        I look forward to hearing from our witnesses today. I am
    interested in what their research shows will happen to premiums
    when Obamacare is fully implemented in 2014.
        Thank you.
        [The prepared statement of Mr. Pitts follows:]

                   Prepared statement of Hon. Joseph R. Pitts

        During 2008 and the run up to passage of the Affordable
    Care Act (ACA) in March 2010, President Obama repeatedly
    promised the American people that their health care premiums
    would go down by anaverage of $2,500 before the end of his
    first term in office.
        He broke that promise.
        In fact, Americans' premiums have already risen by more
    than $3,000, and the expensive part of the ACA hasn't even been
    implemented yet.
        It is basic common sense that if you require individuals to
    buy a one-size fits all, government-mandated health plan that
    covers everything, rather than allowing individuals to pick the
    plan that best fits their needs, choice will be limited and
    premiums will rise.
        When Obamacare adds mandatory benefits, regulations like
    guaranteed issue and community rating and new taxes and fees on
    insurance plans, premiums will only grow more unaffordable for
    Americans.
        So unaffordable in fact that the authors of the law decided
    the only way to get people to buy health coverage was to force
    them to buy it or face a fine from the IRS.
        Now, my friends on the other side of the aisle will point
    out that the ACA includes subsidies to help individuals buy
    these more expensive health plans. And they are correct. More
    than $1 trillion in subsidies is available for this purpose.
        However, households earning as little as $46,000 will be
    ineligible for premium assistance. Even after receiving
    subsidies, Americans earning as little as $25,000 will still
    pay more for their health insurance than they would if the ACA
    had not been enacted.
        Making low-income and everyday Americans pay more for
    private health coverage is not health reform. It's making their
    life harder at a time when our fellow citizens face sluggish
    economic growth, slow jobcreation, and little disposable
    income.
        I recommend to all of you a report released last week by
    Energy and Commerce Majority Staff, entitled ``The Price Of
    Obamacare's Broken Promises: Young Adults and Middle Class
    Families Set to EndureHigher Premiums and Unaffordable
    Coverage.''
        The report compiles data from over 30 studies and analyses
    that examine the effect of Obamacare provisions on health care
    premiums in the individual and small group market.
        It also includes a state-by-state analysis of estimated
    increases in individual market premiums that can be directly
    attributed to Obamacare.
        My home state of Pennsylvania can expect to see premiums in
    the individual market rise about 39 percent.
        States such as Arizona, Arkansas, Georgia, Idaho, Indiana,
    Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Wisconsin,
    and Wyoming could see individual market premiums rise as much
    as 100 percentor higher, due to the Affordable Care Act.
        The increases for young adults in the individual market are
    much higher.
        One analysis estimates that 80 percent of young Americans
    earning over $16,000 will pay more for their coverage once the
    law is fully implemented than they pay today.
        And we don't have to rely merely on estimates of what is
    going to happen to premiums.
        Many of the provisions of Obamacare, such as an individual
    mandate, guaranteed issue, and community rating have been tried
    before. Premiums skyrocketed, choice was limited, and these
    Obamacare style reforms made it harder to find affordable
    coverage
        In today's economy, American families simply cannot afford
    to pay higher out-of-pocket health costs than they would if
    Obamacare had never been enacted.
        Our young people, many of whom cannot find jobs, cannot
    afford triple digit increases in their health premiums.
        A central promise of the Affordable Care Act is that health
    care would be more affordable under the law.
        For many middle class families and young adults, that turns
    out to be a broken promise.
        I look forward to hearing from our witnesses today. I'm
    interested in what their research shows will happen to premiums
    when Obamacare is fully implemented in 2014.

                                    #  #  #

        Mr. Pitts. I yield the balance of my time to--is Dr.
    Gingrey here?
        Anyone seeking 1 minute? If not, I yield back the balance
    of my time, and at this point the chair recognizes the ranking
    member of the full committee Mr. Waxman for 5 minutes for an
    opening statement.

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

        Mr. Waxman. Thank you, Mr. Chairman, and I thank Mrs. Capps
    for letting me go ahead of her and making my opening statement.
        My Republican friends want to ignore the broken healthcare
    system we had before the Affordable Care Act. They want to
    ignore the tens of millions of Americans who will finally have
    access to affordable care coverage in 2014. And they want to
    ignore the fact that for the overwhelming majority of
    Americans, health reform will result in much more affordable
    coverage. I think ignoring these facts is an exercise in
    willful ignorance.
        In the world before the Affordable Care Act, nearly 50
    million Americans have been uninsured. Millions have been
    losing coverage every year. Millions more were excluded from
    coverage because of insurance company discrimination, and
    lacking coverage was a life-threatening condition. While tens
    of millions of Americans suffered in this broken market, a tiny
    segment of the population was able to purchase cut-rate, low-
    quality coverage. When insurance companies have to provide real
    coverage to every American, this small group of people will no
    longer benefit from insurance companies' rampant
    discrimination.
        Republicans and their allies in the insurance industry have
    taken deeply flawed studies of this issue and tried to argue
    that health reform will drive up everyone's premiums. Well,
    that is a false claim, and I think it is irresponsible. The
    claims are false because they are based on studies that ignore
    key pieces of the health-reform legislation.
        Under the Affordable Care Act, consumers will be able to
    purchase far more valuable and dependable coverage, and there
    will be limits on the overall out-of-pocket spending that
    insurance companies can demand. Ignoring these reforms gives a
    deeply misleading picture of the true cost of coverage. For
    young people in particular, the subsidies in the Affordable
    Care Act, the law's new catastrophic plan, and the ability to
    stay on a parent's plan until age 26 will all help keep costs
    low. Studies that ignore these factors do not reflect reality.
    The reality is that the vast majority of Americans will see
    their premiums stay stable or decline dramatically in 2014.
        Prior to reform Americans could be locked out of coverage
    entirely based on a preexisting condition. They were routinely
    asked to pay 5 or even 10 times more than their neighbors for
    coverage because of their age, their gender or their health
    status. For these millions of people, the reforms in the
    Affordable Care Act will bring costs down dramatically. That is
    the true story of how premiums will change under the Affordable
    Care Act.
        We all know how important it is that every American sign up
    for health insurance. They will have this opportunity at the
    beginning of next year. It has been documented again and again
    that people who go uninsured are more likely to get sicker and
    to die younger than people with insurance. We need to be
    encouraging our constituents to get covered, not scaring them
    off with warnings about government-run health care and a
    radical spike in premiums.
        It is past time that we in Congress work together to help
    smoothly implement this law. I hope that after this hearing we
    can move beyond political messaging to carry out the real work
    that the people sent us here to do. Certainly we ought to
    exercise our oversight, but oversight is looking at what is
    happening and trying to change the situation to make the laws
    work, not to still complain about the laws that you fought
    against and lost.
        This law has been adopted by the Congress and signed by the
    President, it has been reaffirmed by the Supreme Court of the
    United States, and, more importantly, the people's votes in
    this last election reelected President Obama and Democrats to
    continue to support this legislation.
        I don't think the majority in this House ought to see its
    job to continue to relitigate the legislative fight. Let us
    learn from realities as they will now unfold and try to make
    things better for everybody.
        I yield back my time.
        Mr. Pitts. The chair thanks the gentleman and now
    recognizes the vice chairman of the subcommittee Dr. Burgess
    for 5 minutes for an opening statement.

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

        Mr. Burgess. Thank you, Mr. Chairman.
        Of course, listening to the ranking member does remind me
    of everything that has happened over the past 3 years' time,
    and, yes, I will admit guilty as charged to having opposed bad
    policy at every turn. But isn't it interesting as we sit here
    this morning on the eve of the third year of the signing of
    this bill into law that the greatest obstacle to its
    implementation is actually the administration itself?
        Why do I say that? Well, first off, when the law was
    crafted, it was special interests down at the White House who
    actually wrote the law, the insurance companies, the
    pharmaceutical companies. Where were the Governors? Why weren't
    they involved? Governors have a big footprint in their States
    as far as healthcare delivery is involved. Why were they not
    consulted?
        Of course, you had the game of hide-the-ball. Gary Cohen
    all but admitted it when he came to our committee a few weeks
    ago--a few months ago and said the administration did not want
    to put out the rules about the essential health benefit until
    after the election because they didn't want to distract people.
    Well, Governors needed to know that information. That is why
    none of them signed up for the State exchanges.
        Then finally to get someone from the administration in here
    to our committee to do the proper oversight of the
    implementation, I just do not understand why it is so hard.
        But to the business at hand this morning, we have all
    talked about how the Affordable Care Act was supposed to
    decrease health insurance premiums. I am going to tell you, in
    health care you don't get something for nothing. There is
    always a cost, and someone always pays it.
        The Congressional Budget Office and organizations on both
    side of the dais have predicting drastic increases in insurance
    premiums for the coming years. The Congressional Budget Office
    predicted average premiums will rise 27 to 30 percent because
    of the Affordable Care Act. And we don't just have to rely on
    their projections. History demonstrates the negative impact of
    such insurance provisions. The 1990s saw huge premium increases
    after enacting policies that we now know as guaranteed issue
    and community rating.
        When the Federal Government subjects health insurers to
    price controls, excess regulations and mandated coverage
    requirements, insurers must make up for the added costs,
    because, unlike the Federal Government, health insurers cannot
    run perpetual deficits, so they turn to their ratepayers to
    provide the additional funds. Those with the highest uninsured
    and unemployment rates in the Nation, individuals under the age
    of 40, will see their premiums increase the most, 40 to 200
    percent according to some estimates.
        The Congressional Budget Office and a wide range of experts
    have warned us from the beginning of the impending rate shock,
    yet Congress has failed to act. Today we will see another way
    the President's Affordable Care Act is anything but affordable
    for all Americans.
        I would now like to yield the balance of the time to Dr.
    Gingrey.

      OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF GEORGIA

        Mr. Gingrey. I thank the gentleman for yielding, and I
    thank the chairman for calling this hearing today.
        I commend the committee for again looking at how Obamacare
    will impact our country's health care. Earlier this week we
    heard how various provisions raised the cost to do business.
    Today we will now hear how it raises costs on individuals
    looking to purchase insurance.
        The economic downturn and slow recovery has hit young
    Americans particularly hard. The unemployment rate for young
    individuals has risen higher than the national average. If a
    20-something is lucky enough to have a job, he or she is likely
    to be underemployed with little prospect for advancement. Many
    are left with the inability to obtain health insurance through
    an employer, his or her parents or Medicaid.
        The grim reality has left young people with few affordable
    options when it comes to healthcare coverage. In fact, more
    than 5 million Americans in their twenties are presently
    without health insurance. Five million Americans in their
    twenties are presently without health insurance.
        The age-band compression in President Obama's health law
    will exacerbate this problem. And I ask you, Mr. Chairman, if
    our goal was to improve the rate of individuals who have
    insurance in this country, why on Earth would we deliberately
    make it more expensive to obtain? The fact is that a 27-year-
    old earning as little as $33,500 a year will see her premiums
    jump nearly $800 next year.
        We need to implement real reforms and bring healthcare
    costs under control. We need to lower costs for young healthy
    adults, not force them to subsidize costs for the older and
    more established Americans who can better afford.
        Mr. Chairman, finding a way to lower healthcare costs for
    young people is not a partisan issue; it is a patient issue. We
    must continue to work together to ensure a healthier future for
    all Americans, and I look forward to working with this
    committee to repeal this discriminatory provision of age
    banding, and I will do that with the LIBERTY Act, and I ask for
    bipartisan support in cosponsoring my LIBERTY Act. It does just
    that.
        Thank you, and I yield back.
        Mr. Pitts. The chair thanks the gentleman and now
    recognizes the gentlelady from California Mrs. Capps for 5
    minutes for an opening statement.

       OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mrs. Capps. Thank you, Mr. Chairman, and I welcome our
    witnesses for appearing today and look forward to your
    testimony.
        Today we are rushing to fit in yet another hearing on
    Obamacare, citing fuzzy figures and speculation, and ignoring
    the context of the failings of our previous healthcare system
    and the opportunities that we now have, thanks to Obamacare.
    Now we have the opportunity to work together on this committee
    to make sure that the ACA is implemented correctly.
        I am sensitive to the fact that this law changes the
    landscape of health care, and that is the point. Our previous
    system was fundamentally flawed, as this committee found in
    detail on numerous hearings. It was a system that allowed
    insurers to routinely deny coverage for even the most minor
    preexisting conditions like previous injuries, pregnancy, or
    even hay fever. It was a system that would drop coverage when
    families needed it most, or imposed arbitrary lifetime coverage
    limits, leaving families who thought they had coverage in
    serious medical debt worrying about how to pay the bills more
    than how to get better. And it was a system that allowed
    insurers to discriminate against the elderly and against women,
    charging them dramatically different rates or refusing to cover
    them at all, even when the vast majority of those plans offered
    no substantial special benefits even such as basic maternity
    care.
        It seems like we have already forgotten just how
    dysfunctional our previous system was for millions of Americans
    who were denied any coverage, whether it was affordable or not.
    So I am hopeful that both sides will use this opportunity today
    to highlight the vast consumer protections that help affordable
    healthcare coverage become a reality for millions of Americans.
        Now, starting in just a few months, health insurance
    companies cannot any longer deny coverage or refuse renewal if
    you happen to get sick, and, thanks to the law, they have to
    actually use your premiums to provide health care or give it
    back. These rebates have already reached 13 million Americans.
    And women will no longer be legally discriminated against and
    charged more for their premiums just because they are a woman.
        The title of today's hearing implies health insurance
    premiums are somehow only now a problem, conveniently ignoring
    the fact that premiums have been rapidly increasing for many
    years. Yes, in the prereform market premiums were held down
    artificially low for some policyholders, but that came at the
    expense of people having no real coverage at all when the
    unexpected medical bills arrived and at the expense of millions
    of Americans being excluded from any coverage at all. So
    looking only at premiums is shortsighted and misleading.
        Moreover, premium costs are far from the full story. Low
    premiums are an illusion that routinely mask high deductibles
    and cost-sharing amounts that are just as significant if not
    more costly than the premiums themselves. New out-of-pocket
    maximums will limit total spending, and consumers are now
    guaranteed a minimum set of benefits like preventive benefits
    without cost sharing, which means that plans are now more
    valuable. These plans now value and support our health and
    wellness instead of just waiting for us to get sick, and
    premium tax credits, reducing cost sharing and provisions
    directed specifically for young adults will help keep insurance
    affordable.
        On top of all these benefits, the facts are simple: The ACA
    has not caused widespread premium increases. The vast majority
    of consumers will see continued premium stability, and millions
    will see lower total costs right away.
        So I hope today we can keep the issue in perspective and
    don't simply resort to the scare tactics that have become so
    commonplace. I believe we should continue to move forward with
    reform. The millions of Americans who have been waiting for
    health insurance cannot afford for us to go backward.
        Since I have a minute remaining, I will just remind the
    previous speaker Dr. Gingrey that now under the coverage of the
    ACA, young people under 26 can stay on their parents' plan, and
    many thousands of them have already been taking advantage of
    that basic coverage within the ACA.
        I yield back the balance of my time.
        Mr. Burgess [presiding]. The gentlelady yields back.
        I would like now to introduce today's witnesses. We are
    very happy to have with us this morning a very erudite and
    experienced panel. Dr. Douglas Holtz-Eakin is the former
    Director of the Congressional Budget Office and serves as the
    president of the American Action Forum. Mr. Wendell Potter is a
    senior analyst at the Center for Public Integrity. Christopher
    Carlson is an actuarial principal for Oliver Wyman.
        Dr. Holtz-Eakin, you are recognized for 5 minutes for the
    purpose of an opening statement.

          STATEMENTS OF DOUGLAS HOLTZ-EAKIN, FORMER DIRECTOR,
     CONGRESSIONAL BUDGET OFFICE; WENDELL POTTER, SENIOR ANALYST,
       THE CENTER FOR PUBLIC INTEGRITY; AND CHRISTOPHER CARLSON,
                   ACTUARIAL PRINCIPAL, OLIVER WYMAN

                    STATEMENT OF DOUGLAS HOLTZ-EAKIN

        Mr. Holtz-Eakin. Chairman Burgess, Congresswoman Capps and
    members of the committee, thank you for the chance to be here
    today. I do have a written testimony that I have submitted. Let
    me just make three points briefly, and then I look forward to
    your questions.
        Point number one is that there are provisions of the
    Affordable Care Act that would lead one to believe that it
    would have an upward impact on premiums; and that, point number
    two, in order to see the magnitudes involved, we have actually
    undertaken some survey research and asked insurers what their
    actuaries are telling them about the implications for those in
    individual and small-employer markets; and then finally, given
    the evidence that there will be upward pressure on a large
    number of premiums, what are the implications of that more
    broadly for the Affordable Care Act and for the Federal budget.
    And I want to talk a little bit about each of those.
        First, the provisions, I think, the committee is quite
    familiar with. There is the combination of guaranteed issue;
    the inability to exclude on the basis of preexisting
    conditions; community rating, which excludes rating on the
    basis of health status or gender, and limits age-rating bands
    to a 3-to-1 ration; the new essential health benefits, a
    minimum benefit package that must be adhered to; and then the
    overall mandate for individuals' employers to provide coverage
    and to carry coverage for the individuals.
        Those provisions, plus some others in the Affordable Care
    Act, the basic coverage itself will increase demand for medical
    services, raise pressure on prices from providers across the
    Nation and thus on the underlying trend of cost care growth,
    and a whole series of taxes that are included in the Affordable
    Care Act which will be embedded into the premium structure and
    raise premiums as well.
        If you take all of those, no individual one is particularly
    novel. We have seen some of this, as the chairman mentioned in
    his opening statement, in the States, but the experience there
    is not one that would lead you to think that there is going to
    be downward or stable premium pressures. Instead, the
    experience has been one of upward premium pressures where these
    have been tried in the past.
        That is all either history or conjecture, and we have done
    modeling, and others have as well, but we thought the useful
    thing would be to go find out. So in the testimony I submitted
    are the results of a survey. That survey was sent to large
    insurers in the United States. The insurers were asked to fill
    out very specific questions about individuals; a young healthy
    individual in six particular States and markets, Chicago,
    Illinois; Phoenix, Arizona; Atlanta, Georgia; Austin, Texas;
    Milwaukee, Wisconsin; and also for older, less healthy
    individuals in either the individual market; and then we did
    the same exercise for the small-group market.
        The insurers who were asked to fill this out covered the
    vast majority of covered lives in the United States. So while I
    don't represent this as some sort of representative sample of
    the insured population, this is a good indicator of what is
    going on out there.
        I won't belabor every single number in the results, but in
    the tables we find that if you look at the younger and
    healthier workers across those markets, the average premium
    increase is going to be about 149 percent. And, as has been
    noted, not every premium is guaranteed to go up. Some of those
    provisions will, in fact, subsidize older, sicker workers, and
    we see modest reductions in their premiums. Our estimate is 26
    percent. In the individual market you get even bigger impacts,
    a 189 percent increase for the young, healthy workers; less
    modest redistributions, small downward, 18 percent, in the
    premiums for the older and sicker workers.
        So I think that tells us that the basic intuition about the
    structure of the Affordable Care Act is playing out in the
    market. We are going to have a combination of legislative
    provisions plus market pressures that will lead to higher
    premiums for certainly the plurality of the insured, who are
    the young and healthy, once the act is fully implemented in
    2014.
        And I guess I would say that there are a couple of
    implications for that. Implication number one is the question
    about individual take-up. The law relies heavily on a tax
    penalty to enforce the individual mandate to carry insurance.
    Given the sharp increases in premiums and the basic calculus
    that individuals can do, will they, in fact, take up the
    insurance and enter the risk pool, or will they remain outside
    of it and pay the tax penalty? If so, the experience will be
    much like the States, who had guaranteed issue, and community
    rating and sharp premium increases.
        For employers the sharp premium increases increase a second
    piece of the calculus which says, you know, we are not going to
    provide the coverage. We will instead send our employees off to
    the exchanges to get insurance. And to the extent that that
    takes place, we will see the Congressional Budget Office
    estimates of the cost of the Affordable Care Act to be lower
    bounds. Instead, larger exchange take-up will lead to expanded
    budget costs, and the higher premiums will increase the subsidy
    per person, exacerbating the overall budgetary impact of the
    Affordable Care Act.
        So I think this is an important issue, and I am privileged
    to have the chance to be here today, and look forward to
    answering your questions.
        [The prepared statement of Mr. Holtz-Eakin follows:]

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        Mr. Burgess. The gentleman yields back his time.
        Mr. Potter, you are recognized for 5 minutes for the
    purpose of an opening statement.

                      STATEMENT OF WENDELL POTTER

        Mr. Potter. Thank you, Mr. Chairman and members of the
    subcommittee. It is a honor to be here today.
        If I may, I would like to begin with an apology to the
    family of Leslie Elder. Leslie died an untimely death at age 83
    last summer, uninsured and facing foreclosure. I owe her family
    an apology because Leslie might be alive today had it not been
    for the work that I used to do. You see, I helped create the
    same kind of deceptive PR campaigns that are being waged today
    to weaken the consumer protections in the Affordable Care Act.
        The campaigns I helped create intentionally misled the
    American people and their elected officials into believing that
    the reform of our health insurance system would do more harm
    than good. Among the tactics we used was hiring consulting
    firms and think tanks to conduct studies and surveys using
    questionable methodology and disclosing only the findings that
    could be useful talking points. These campaigns helped maintain
    an unacceptable status quo in which too many Americans have had
    to declare bankruptcy, lose their homes, and, like Leslie
    Elder, die much too young.
        Leslie's daughter believes her mother would be alive today
    if she had been able to get health insurance. No company was
    willing to sell her an affordable policy because of her age,
    her gender and ultimately her serious but treatable illness.
        There have been an untold number of Leslie Elders who have
    died prematurely because of insurance company practices that
    the Affordable Care Act thankfully is ending. The latest scare
    campaign has insurance companies professing concern about young
    adults, but what they really worry about is no longer being
    able to cherry-pick the youngest and healthiest. In most States
    today insurance companies are able to charge older people like
    Leslie 5, 6, or even 10 times more for the same coverage they
    gladly will sell to younger, healthier people. In some States
    there is no limit at all.
        One of the reasons we are here today is the Affordable Care
    Act prohibits insurers from charging older people more than
    three times as much as they charge young adults. This new age-
    rating band foils attempts by insurance companies to deny
    coverage to people they want to avoid, people like Leslie
    Elder.
        Of course, the current coordinated attack on the law fails
    to consider many important factors, and, as a result, the
    studies being cited in this campaign intentionally mislead the
    public. Here are some factors that the insurance industry is
    not talking about, but that a recent and unbiased Urban
    Institute analysis confirmed.
        Only a small percentage of young adults will be affected,
    while many people at the other end of the age band will see
    enormous benefits that allow them to stay covered and maintain
    their health. There are many serious deficiencies in today's
    coverage, especially in the low-value, minimal-benefit coverage
    that is being marketed to young people. Banning junk insurance
    policies, those that are offered even by the biggest companies,
    while maintaining access to low-cost policies will mean that
    Americans will be able to purchase real coverage that protects
    them from financial ruin if they happen to fall ill.
        Discriminatory practices have for years priced many people
    out of the market, allowing for artificially low premiums for
    others. And finally, premium tax credits will soon be available
    that will dramatically reduce costs for many consumers.
        In fact, coverage under the Affordable Care Act will be
    more affordable for the vast majority of young people because
    of the Medicaid expansion, the premium tax credits for low- to
    moderate-income earners, and the ability of young people to
    remain on their parents' policies until age 26 if they don't
    have jobs with health benefits. Adults under 30 will also be
    able to purchase catastrophic coverage with lower premiums and
    higher deductibles. Keep in mind that millions of young adults
    who have employment-based coverage will not be affected at all.
        The title of today's hearing is Unaffordable: Impact of
    Obamacare on Americans' Health Insurance Premiums. The title
    implies that before the Affordable Care Act came along,
    premiums were stable, but now are on the verge of skyrocketing
    because of the reform law. Nothing could be further from the
    truth. But my former colleagues in the insurance industry are
    hoping that you will either have amnesia or turn a blind eye to
    the fact that premiums truly were skyrocketing before the
    Affordable Care Act.
        The average family premium increased an astonishing 131
    percent between 1999 and 2009. That is more than three times
    worker wages, four times general inflation, and considerably
    faster than overall medical inflation.
        I ask Congress not to buy into the insurance industry's PR
    campaign. The vast majority of young adults will benefit from
    the law. Many for the first time will able be able to get
    decent, affordable coverage that will enable them to stay
    healthy without fear of financial ruin.
        Mr. Chairman and members of the committee, many of your
    constituents have been counting the days until January 1, 2014,
    when insurance companies will no longer be able to deny them
    coverage or charge them far more than their family budgets can
    handle. Please do not dash their hopes. If you change the
    Affordable Care Act to enable insurance companies to meet
    profit goals--and that is what is really going on here, helping
    them to meet profit goals--then the results will be tragic, and
    many of your constituents will continue to be at risk of dying
    prematurely like Leslie Elder.
        Thank you.
        [The prepared statement of Mr. Potter follows:]

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        Mr. Burgess. The gentleman's time has expired.
        The chair recognizes Mr. Carlson for 5 minutes for purposes
    of an opening statement.

                    STATEMENT OF CHRISTOPHER CARLSON

        Mr. Carlson. Mr. Chairman and members of the subcommittee,
    thank you for this opportunity to testify on the impact of the
    Affordable Care Act on health insurance premium rates. My
    testimony will focus on two topics that I and the other
    actuaries at Oliver Wyman have studied extensively: first, the
    estimates we have developed on the increase in premiums that
    will be required to fund the health insurer taxes beginning in
    2014; and, second, the analysis that we performed to measure
    the impact of the 3-to-1 age rating limitation of the ACA on
    nongroup policies.
        Regarding the first topic, Oliver Wyman has researched
    extensively the impact of the health insurer taxes. We and
    others, including the CBO, believe that these fees will be
    passed through directly to policyholders in the form of higher
    premiums. Overall we anticipate that these taxes will increase
    premiums by between 1.9 and 2.3 percent in 2014, increasing to
    between 2.8 and 3.7 percent in 2018.
        For the second topic, Kurt Giesa and I coauthored a article
    published in the American Academy of Actuaries magazine. The
    purpose of this article was to assess the impacts of age-rating
    limitations required by the ACA. Currently in most States
    health insurance premium rates are allowed to vary by a ratio
    of at least 5 to 1 based on the age of the individual. This is
    relative to actual costs, which may vary by as much as 6 or 7
    to 1 based on age alone. Therefore, health insurers must
    compress the rates at the high and low ends to maintain the
    correct ratio of premiums based on age.
        There are certain things that our report says, and there
    are other things that our report does not say. To be clear, our
    report assumes that the average overall impact of age-rating
    compression is a zero-sum game. Certain policyholders, those at
    the youngest ages, will pay more. Certain policyholders, those
    at the oldest ages, will pay less. But in the aggregate for all
    policyholders, premiums collected with and without age-rating
    compression will be the same.
        We do not say in our report that the premiums for everyone
    in the individual market will increase by 40 percent, as has
    been quoted. In fact, we expect that most people will see a
    decrease in the amount of premiums they pay, primarily due to
    the premium subsidies offered through the ACA.
        Our report is intended to measure the impact of age-rating
    compression; however, we also make an assumption to the impact
    of all other provisions of the ACA. Specifically the CBO
    provided an analysis of the health insurance premiums under the
    ACA in a letter to Senator Evan Bayh in 2009. In it the CBO
    estimated that nongroup premiums would increase by 10 to 13
    percent relative to current law. This amount represents
    increases due to factors such as the actuarial value of
    benefits, competitive factors and the enrollment of uninsureds.
    For our analysis we assumed that the impact of these other
    factors would be at the low end of this range or 10 percent.
        Our report illustrates the impact on premiums for those
    individuals that are not eligible for the subsidies. What our
    report shows is that for individuals in the lowest age bracket,
    ages 21 to 29, premiums would increase by 42 percent due to age
    rating and other factors, or 29 percent due to age-rating
    compression alone. Further, individuals at ages 30 to 39 would
    see an increase of 31 percent, or 19 percent due to age-rating
    compression only. At the other end, individuals at ages 60 to
    64 would see their premiums increase by 1 percent for all
    factors, or decrease by 8 percent due to the age-rating
    compression.
        There are several factors that should be considered when
    understanding the results in our report. First, our purpose was
    to illustrate one of the unintended consequences of the ACA.
    While most individuals will see their premiums decrease as a
    result of the premium subsidies available on the exchanges,
    there are certain individuals, primarily those under the age of
    40 and that are not eligible for any premium subsidies, whose
    premiums may increase substantially due to the limitations on
    the age rating.
        Second, individuals under the age of 30 have an alternative
    to purchasing at premium rates that are affected by the age-
    rating compression. They may purchase a catastrophic policy,
    which, under the rules set by the Department of Health and
    Human Services, may have a rating factor that adjusts the
    premium to reflect the expected demographics of the enrollees.
    However, this severely limits the options available to younger
    individuals in selecting a policy.
        Mr. Chairman, again I thank you for the opportunity to
    speak, and I look forward to answering any questions.
        [The prepared statement of Mr. Carlson follows:]

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        Mr. Burgess. The gentleman yields back.
        We will now proceed to questions. I recognize myself first
    for 5 minutes for the purpose of questions.
        Mr. Carlson, let us stay with you. We have all seen the
    stories in the newspapers warning of premium increases as a
    result of the Affordable Care Act. The Associated Press
    reported that premiums could more than double in some markets
    and States. We are asking you here today as an actuary, and we
    want to know about several provisions of the law and whether
    you believe that they will generally increase or decrease
    premiums. Do they make life better or worse?
        I have got limited time, so I was hoping for one-word
    answers here. Premiums higher or lower, life better or worse.
    Your choice on how you respond. But provisions such as
    guaranteed issue.
        Mr. Carlson. Yes, it will increase premiums. You know, it
    will certainly make life better for some, but from the
    perspective of the premiums, yes, it will increase premiums.
        Mr. Burgess. Coverage for rehabilitative services.
        Mr. Carlson. Yes, it will increase premiums.
        Mr. Burgess. Coverage for habilitative services.
        Mr. Carlson. Yes, it will increase premiums.
        Mr. Burgess. Coverage for oral and vision care.
        Mr. Carlson. Yes.
        Mr. Burgess. Limitations on cost sharing.
        Mr. Carlson. Yes, it will increase premiums.
        Mr. Burgess. Limitations on out-of-pocket maximums.
        Mr. Carlson. Yes, it will increase premiums.
        Mr. Burgess. Coverage for emergency services at in-network
    cost-sharing levels with limitations on things like
    preauthorization.
        Mr. Carlson. Yes, it will increase premiums.
        Mr. Burgess. Requirements related to annual limits.
        Mr. Carlson. Yes.
        Mr. Burgess. Requirements related to lifetime limits.
        Mr. Carlson. Yes.
        Mr. Burgess. Federal and State exchange administrative
    fees.
        Mr. Carlson. It may increase premiums.
        Mr. Burgess. Medical device tax.
        Mr. Carlson. Yes.
        Mr. Burgess. Health insurance tax fee.
        Mr. Carlson. Yes.
        Mr. Burgess. And, you mentioned this in your testimony. I
    mean, I guess the assumption of the people who were writing
    this was that things like the medical device tax and the health
    insurance fee, those dollars would be taken from the chief
    executives of the company. But that is not the way the world
    works, is it? Those monies are actually collected from the
    ratepayers ultimately; are they not?
        Mr. Carlson. Yes, they are. I mean, if you increase the
    benefits, the premiums will go up, and if you increase costs to
    the insurers, those will have to be funded somehow.
        Mr. Burgess. Well, let us look at, you know, proponents of
    the Affordable Care Act say the premiums spike as a result of
    these Affordable Care Act provisions will be offset by
    subsidies. You mention that in your testimony. Let us set aside
    for a moment the question of whether it makes sense to borrow
    $2 trillion from foreign nations to pay for a new entitlement
    when current Medicare and Medicaid programs are in trouble. Let
    us also set aside that lowering healthcare costs, according to
    some on the other side of the dais, means placing expensive
    regulations on what Americans must buy and offsetting some of
    the costs for people with dollars, and all of that comes from
    the taxpayers. Your study addressed this claim. At what income
    level are some younger Americans expected to start paying more
    as a result of the healthcare law?
        Mr. Carlson. Well, our study looks at the age-rating
    compression, and individuals who are under the age of 30 who
    are at a Federal poverty level of 225 percent, which is roughly
    about $25,000, they will pay higher premiums as a result of the
    age-rating compression.
        Mr. Burgess. So that is sort of the break point for an
    individual is $25,000?
        Mr. Carlson. Yes. Yes. And anyone above that level, their
    premiums will be affected by the age rating.
        Mr. Burgess. Very well.
        Dr. Holtz-Eakin, some supporters of the Affordable Care Act
    argue that the law's most expensive requirements will only fall
    on the individual market. I remember the discussions in this
    room when leading up to it, it seemed like our whole focus
    should be on people in the individual and small-group market,
    but it looks likes we made things tougher for them; does it
    not?
        Mr. Holtz-Eakin. Certainly these premium increases are
    going to be dramatic in the individual market for healthy
    individuals. Certainly.
        Mr. Burgess. We also heard from Ranking Member Waxman when
    he was giving his opening statement about the number of people
    who fall in the category of preexisting condition and can't get
    insurance. Now, in the large-group market, that was really much
    less of a problem; was it not?
        Mr. Holtz-Eakin. The HIPAA provisions were intended to
    solve that problem years ago.
        Mr. Burgess. So when he gives a figure of tens of millions
    of people who are unable to get insurance for a preexisting
    condition, that number is probably a little bit overstated; is
    it not?
        Mr. Holtz-Eakin. Some of the high-end dramatic ones simply
    are beyond the realm of possibility.
        Mr. Burgess. We know this, that it was a problem in the
    small-group and individual markets, and some States have risk
    pools and reinsurance to provide help there. The Federal
    Government set up a new program. I remember looking at these
    numbers right before the Supreme Court ruled, because I thought
    the Supreme Court was going to rule differently, as Mr. Waxman
    pointed out, and I thought we needed to be able to start
    talking about what happens to those folks who are in the
    Federal preexisting pool, and the number was startlingly small.
    It was not that they are not important people, but it was
    65,000, nowhere near the tens of millions that have been talked
    about during the rhetoric. Is that a fair statement to make?
        Mr. Holtz-Eakin. Certainly that is a fair statement. I
    mean, as you know, I spent a lot of time looking at the high-
    risk pool design, and we didn't see anything like the take-up
    that was claimed.
        Mr. Burgess. Very well. My time is expired. I recognize the
    ranking member of the subcommittee, Mrs. Capps from California.
        Mrs. Capps. Thank you, Mr. Chairman.
        Mr. Carlson, the chairman asked you if the provisions in
    the ACA make life better or worse, and your first answer was
    that, yes, that guarantee issue will make life better for many
    people. I just want to make sure that was clear for the record.
        Thank you, Mr. Potter, for your powerful story about Leslie
    Elder. As you know, your fellow witnesses today have produced
    faulty studies that ignore specific and key policies in the
    Affordable Care Act which actually do help lower costs for all
    Americans, young and old. But the key thing they ignore is that
    the vast majority of this Nation will benefit from an end to
    insurance company discrimination.
        A report by the National Women's Law Center detailed the
    pervasive discrimination women currently face in today's
    insurance market. The report revealed that the same health
    insurance policy can cost a woman 30, 50, even 85 percent more
    than a man of the same age, even if maternity care is not
    covered, which is in itself discriminatory. These higher
    premiums can have a significant impact on their budget, women's
    budgets, costing a 40-year-old woman as much as $1,250 more
    each year than a man of the same age getting the exact same
    coverage. And let us not forget women have often been denied
    all coverage just because they have a previous existing
    condition, such as pregnancy, or having had a C-section, or
    being victims of domestic violence.
        The Affordable Care Act ends these abuses by implementing
    landmark new protections for women and banning discrimination
    by insurance companies on the basis of gender or preexisting
    conditions.
        Mr. Potter, can you tell us about the way insurance
    companies approached covering women, both young and old, prior
    to reform? You are knowledgeable on that topic.
        Mr. Potter. I certainly can, and the approach was to
    discriminate against women and people because of their age.
    What is important to keep in mind is that as we talk about
    community rating in this country, that is how health insurance
    began. Virtually all of the Blue Cross plans initially were--
    their plans were based on community rating, which meant that
    everyone, regardless of age or gender or health status, paid
    the same amount. That changed when large insurance companies
    began to come into the market and see that they could cherry-
    pick the youngest and the healthiest and make a substantial
    amount of money. That is what has happened, and as a
    consequence of that, even the Blue Cross plans had to change
    the way they did business.
        As a result, over the years we have got a system that
    really discriminates, especially against people as they age and
    against women. You are exactly right. And they do this because
    when you are segmenting the population that way, and you are
    often charging some people so much that they don't buy
    insurance, and that is why we have 50 million people in this
    country without coverage right now, and that helps their
    profits. When you have people who are discriminated against,
    and they simply can't afford the policies because they happen
    to be born with a preexisting condition called being female,
    then they can make a lot of money.
        Mrs. Capps. What do you think we can expect to happen to
    women's premiums after the ACA really kicks in?
        Mr. Potter. They will go down. Insurance companies will no
    longer be able to single them out and say, just because you are
    a woman, you have to pay more than your brother or some other
    person who is of similar age, but just happens to have been
    born male.
        Mrs. Capps. And do you expect this fall in premiums will be
    limited to women, or are there men and children, other issues
    will also be covered in the same way in the ACA?
        Mr. Potter. Absolutely. Virtually everyone; in fact, I do
    think everyone will benefit from the Affordable Care Act and
    get some relief from price gouging.
        Keep in mind, too, it is important as we are talking about
    the individual market, we are talking about 14 million people.
    There are 315 million people in this country. That means we are
    talking about a population that is slightly more than 4 percent
    of the total population. And of that 4 percent, most of the
    people in that individual market will stand to benefit, become
    able to get coverage through the expansion of the Medicaid
    program, through the tax credits or subsidies for low-income
    earners, and for relief at the other end of the spectrum for
    people who have been charged up to 10 times or more for
    coverage in the past to the point that many of them can't buy
    coverage. But at least we are talking about a very small
    segment of the population to begin with.
        Mrs. Capps. Thank you very much, and I yield back the
    balance of my time.
        Mr. Burgess. The gentlelady yields back.
        The gentleman from Texas Mr. Hall is recognized for 5
    minutes for questions.
        Mr. Hall. Thank you, Mr. Chairman.
        Mr. Holtz-Eakin, beginning in 2014, the Affordable Care
    Act, the Obama act, imposes a new tax on health insurance of at
    least $100 billion. That is an accurate figure; is it not?
        Mr. Holtz-Eakin. Yes, sir.
        Mr. Hall. I think that our committee got that from the
    Joint Tax Committee, so we can live with that figure. That is
    good to go with. Probably none of the three here deny that
    figure.
        Mr. Holtz-Eakin. In fact, one of the unprecedented features
    of that tax is that it demands that a fixed amount of revenue
    be raised regardless of the circumstances in the industry. So
    $8 billion in 2014 no matter what.
        Mr. Hall. And the tax begins at $8 billion in 2014 and
    rises to $14.3 billion in 2018, and thereafter it increases
    annually based on a premium growth.
        I think we are all aware that the tax is going to fall on
    all individuals and businesses that purchase healthcare
    insurance. Maybe less well known or less well admitted by the
    writers of this act is that the tax law hits seniors enrolled
    in the Medicare Advantage plans, State Medicaid programs and
    Medicaid health plans serving low-income families. Right?
        Mr. Holtz-Eakin. That is correct, sir.
        Mr. Hall. Can you explain for the committee what kind of
    impact beneficiaries enrolled in the private Medicare and
    Medicaid plans can expect to encounter after the tax is fully
    phased in?
        Mr. Holtz-Eakin. If you look at the structure of the tax, I
    think there is broad agreement that the tax itself will end up
    being embedded into premiums; that insurers will have to
    recover that cost, and the way to do so is to raise premiums.
        A unique feature of the tax is that it is not deductible
    for purposes of paying corporation income taxes, something that
    I have never seen before in the tax law. So if you are not a
    tax-exempt insurer, if you have to pay a dollar of premium tax
    and you raise your premiums by a dollar to do it, you will
    still come up short because you have to pay tax on that dollar
    as well. So you have to raise premiums by more than a dollar,
    actually $1.54, to cover that provision. That is a lot of
    upward pressure on premiums. Not everyone will be subject to
    that, so you start to see shuffling in coverage, shuffling in
    lines of business. The Medicare Advantage plans, the managed
    Medicaids are going to be subject to the same thing. That means
    disruption in provider networks, higher premiums across the
    board.
        Mr. Hall. I thank you for that.
        I didn't hear you say Medicaid programs. How will the tax
    impact State Medicaid programs? Our Governor was in town
    yesterday and discussed with the Republican Members----
        Mr. Holtz-Eakin. It is exactly the same. All these lines of
    insurance are subject to this, and all will see premium
    pressures as a result.
        Mr. Hall. Then the ``yes'' answers that were extracted
    earlier by the chairman were based on services that increase or
    become more expensive, and either of those situations are what
    you glean from reading the act itself?
        Mr. Holtz-Eakin. I mean, the tax is a cost that businesses
    have to cover for, if I understand the question right.
        Mr. Hall. Thank you. I yield back my time.
        Mr. Burgess. The gentleman yields back.
        The chair recognizes the gentleman from Texas Mr. Green for
    5 minutes for questions.
        Mr. Green. Thank you, Mr. Chairman. And this is not
    directed at you, but I guess I am frustrated, because I have
    been on this committee since 1977, and the Affordable Care Act
    was passed 3 years ago and upheld by the Supreme Court, and
    last session all we did was try and repeal it, and that is not
    going to happen. It won't pass the Senate. Yet every hearing
    this week we have had is to talk about how bad it is.
        I would hope our committee would sometime get to the point
    where, OK, let us see what we can do to fix it. Instead of just
    making political points, we can actually pass legislation. I
    think that is what everybody in the country would like us to
    do.
        But in this panel is a good example. You know, we have some
    great witnesses, and I have heard them before on some cases.
    But, you know, the Affordable Care Act is the law, and there
    are things in it I would like to change, and I know everybody
    on the committee would, but we are not going to repeal because
    it is not going to happen, at least for 4 years. So that is the
    frustration.
        Let us make it work. And there are some things that are
    really successful, and we really won't know until next year on
    the success of it and when we see some of the requirements go
    in.
        There was a report released yesterday by my colleagues, my
    Republican colleagues, on prediction of premium increases under
    the Affordable Care Act, and the Republican report ignores the
    fact that over 90 percent of insured Americans have employer or
    public coverage, which is Medicaid or Medicare. And even an
    unbiased observer, including the CBO, has said that 240 million
    people will not see their premiums increase under the ACA.
        Second, the American Action Forum study totally ignores the
    effect of premium tax credits. These credits will go directly
    to the cost of coverage, immediately lowering premiums each
    month, and the CBO has estimated the majority of the
    individuals getting coverage in the exchanges would receive
    subsidies. And it is deeply misleading to ignore the impact of
    those on affected premiums.
        Let me get to my questions now. Mr. Potter, is it accurate
    to compare a low-premium plan in today's market with the type
    of quality coverage that will available under the Affordable
    Care Act?
        Mr. Potter. No, not at all, because a lot of the policies
    that are sold to people, and often people enroll in these
    unwittingly, are plans with very, very limited benefits or very
    high deductibles, and people often find out when it is too late
    that they are woefully underinsured.
        And one of the objectives of the Affordable Care Act is to
    make sure that people are getting value for what they buy, and
    that will be something that we will see as a result of full
    implementation of the law. We will no longer see people who are
    in junk policies, because they will be a thing of the past.
        Mr. Green. Well, I have a district, and one of the highest
    in the country, at least the 2000 census--we haven't seen the
    numbers from the 2010 census--of people who work, and yet they
    don't have insurance through their employers. It is a very
    urban area in Houston, an industrialized area. And for decades,
    outside of their job opportunities, the next thing they ask
    once they get a job is, what kind of health care can I get? And
    some employers offer very good health care. Some offer, as you
    said, very limited amounts with high deductibles. Now, those
    are cheaper in premiums, but they also don't really establish
    what we hope in our healthcare world is a medical home where
    people feel comfortable going to instead of, even with a high
    deductible, are still going to show up at our emergency rooms
    because they don't have the coverage that will cover them.
        I know you worked in the insurance industry for a long
    time. Just out of curiosity, did the industry ever support
    outside research to help generate its public relations and
    drive its public policy agenda?
        Mr. Potter. The insurance industry spends a considerable
    amount of their premium dollars on various public relations and
    lobbying efforts, but not so much on research that is all that
    reliable. The research is intended to make a point.
        You know, it is not necessary for anyone's premiums to go
    up, we need to understand that, because we are talking about
    changing the way these companies will do business. There will
    not be quite as much need, maybe not nearly as much need, for
    underwriting.
        McKenzie & Company did a study of health care costs around
    the world in 2008, and it showed in the U.S., of the
    administrative expenses of insurance companies, by far the
    largest component of that are marketing and underwriting
    expenses. And that is just not going to be all that necessary,
    because you are not going to be needing to use all of those
    resources.
        Mr. Green. I am almost out of time. Again, having served in
    the Texas Legislature and trying to deal with the uninsured, it
    was almost impossible. We created high-risk plans, but the only
    people that went to them were high risk. And the State wouldn't
    put any money in, so nobody could afford the coverage. So one
    of the best reforms in the Affordable Care Act is the 80
    percent requirement that they have to pay out in medical
    benefits. I know physicians like that, hospitals like that,
    because they actually know that they are going to receive the
    payments.
        Mr. Chairman, I know I am out of time, and I appreciate
    your patience.
        Mr. Burgess. The gentleman yields back.
        The chair recognizes the gentleman from Illinois Mr.
    Shimkus, 5 minutes for questions.
        Mr. Shimkus. Thank you, Mr. Chairman, and I know my friend
    from Texas is still in the room. I would just like to remind
    him that we had not one hearing on this healthcare law before
    it was passed on the floor. There was not one.
        Then number two I will say, as ranking member of the Health
    Subcommittee, the remaining part of that year, every week I
    asked for the chairman of the Health Subcommittee to have
    hearings on how this law would be implemented, and we were
    never offered one.
        So what we are trying to do now is at least--is the whole
    ``we got to pass the bill before we know what is in it.'' Now
    we are trying to figure out what is in it, and that is what
    these hearings are part of.
        Everybody is going to get a chance to ask our witnesses,
    and we are going to be able to make our points about the
    benefits and the disadvantages. But don't trash the system that
    legislators need to do, which is our oversight role in this
    body.
        So I wouldn't respond forcefully except for I was the
    ranking member of the Health Subcommittee when this law got
    passed. Nathan Deal was--when the law was passed, Nathan left
    to run for Governor. I assumed that role, and for the final
    part of that Congress, every week I asked for a hearing on this
    piece of legislation, and every week it was denied.
        Mr. Green. Would the gentleman yield?
        Mr. Shimkus. I would be happy to yield.
        Mr. Green. Well, you understand how it feels to be in the
    minority.
        Mr. Shimkus. I definitely do.
        Mr. Green. My quote was--and you remember we had literally
    hours and hours, including very late markups on the bill. Now,
    having said that, we should have had follow-up hearings on the
    implementation.
        Mr. Shimkus. Just reclaiming my time, the bill that was
    passed was the Senate bill, without hearings, without movement
    through the committee. It was picked up from the Senate and
    passed on the floor.
        Mr. Green. Would the gentleman yield?
        Mr. Shimkus. I am just telling you the facts.
        Mr. Green. And again, I agree that that happened. The
    problem is that we didn't have an alternative. Believe me, the
    majority, no matter who is in the majority, does that same
    thing.
        Mr. Shimkus. Reclaiming my time, it was the Speaker at that
    time who said the American people, we have to pass the bill
    before we know what is in it.
        Mr. Green. That wasn't my----
        Mr. Shimkus. All we are trying to do now is to find out
    what is in this piece of legislation, so I applaud this series
    because it is not even rolled out. It is not in full
    implementation yet. So that is--I mean, again, that is what we
    are trying to do. And I wanted to ask just Mr. Potter, and it
    is kind of key to this last comment about 80 percent, you know,
    has to go to services in the plan and part of that debate was
    an analysis about how much administration planned that our
    Medicare system funds during the debate. Do you know what that
    percentage is of the overhead cost is the bureaucracy of
    Medicare?
        Mr. Potter. Well, the medical loss ratio, the equivalent of
    that in the Medicare program is considerably lower.
        Mr. Shimkus. Do you know what that percentage is?
        Mr. Potter. I have heard that the administrative expense is
    about 3 percent in the Medicare program.
        Mr. Shimkus. And that is the numbers that I used. That is
    the numbers my friends on the other side used.
        Now, can you tell me which health insurance plan the
    private sector of the market or the government run market is
    actually unsound and going broke?
        Mr. Potter. I think the current commercial system is
    absolutely unsustainable.
        Mr. Shimkus. OK. The question is, Medicare or the private
    health insurance market, which one is going broke?
        Mr. Potter. I don't know, sir.
        Mr. Shimkus. OK. Let me ask Mr. Carlson. Do you have an
    idea?
        Mr. Carlson. Well, I certainly think that the commercial
    market is not going broke, and that is why they have actuaries
    to make----
        Mr. Shimkus. Right. And we haven't asked you that is why
    they have actuaries to make sure they don't go broke.
        Dr. Holtz-Eakin.
        Mr. Holtz-Eakin. The government has actuaries but it is
    still going broke, sir.
        Mr. Shimkus. And that is really this part of this fight we
    are having in Washington and how we can actually reform the
    entitlement programs so that we are not in a $16 trillion debt.
    Obamacare makes the program even worse because it creates a new
    entitlement that is not funded that makes actuarially, sir, Mr.
    Potter, our Nation less sound today, next year and in the
    foreseeable future.
        I yield back my time.
        Mr. Burgess. The gentleman yields back. The chair
    recognizes Mr. Sarbanes of Maryland 5 minutes for purposes of
    questions, sir.
        Mr. Sarbanes. Thank you, Mr. Chairman.
        Dr. Holtz-Eakin, do you think the Affordable Care Act can
    work?
        Mr. Holtz-Eakin. I am sorry, sir?
        Mr. Sarbanes. Do you think the Affordable Care Act can
    work?
        Mr. Holtz-Eakin. I am skeptical, to be honest, sir.
        Mr. Sarbanes. OK. Mr. Carlson, do you think it can work?
        Mr. Carlson. I think there are things within the law that
    could be changed, but you know, I can't comment overall whether
    it is going to work and----
        Mr. Sarbanes. It could work.
        Mr. Carlson. It certainly could work but it may not work.
        Mr. Sarbanes. Americans could make it work.
        Mr. Carlson. Potentially, right.
        Mr. Sarbanes. How would you define work?
        Mr. Potter, do you think it can work?
        Mr. Potter. I do. I think it can work. I think that we
    will--as you bring more people into coverage, you make a big
    difference and you begin to end some of the cost shifting that
    is so problematic in this country, and that contributes to all
    of us paying more in insurance premiums as a consequence.
        Mr. Sarbanes. Do you think the system we had before was
    workable over time?
        Mr. Potter. Not at all, not at all workable, nor was it
    sustainable either. You cannot keep raising premiums, as I
    said. They increased 131 percent between 1999 and 2009. You
    can't keep doing that and you can't--and at the same time
    insurance companies were shifting more of the cost of care from
    them and from employers to employees and dependents. You can't
    keep doing that and expect that that system is sustainable. It
    is simply not.
        Mr. Sarbanes. What I am concerned about is there are--we
    can all agree that there is going to be some increases for some
    portion of the population as a result of implementation of
    this, but we are talking about increases within that individual
    market for younger healthier people who are more in a position
    to afford those increases than their peers might be because if
    their peers can't afford it, they are going to be able to take
    advantage of these Affordable Care credits, these tax credits
    when they go into the exchanges, so you are talking about a
    relatively small number of people who may experience, and I
    think arguably in an affordable way, an increase in their
    premiums, but based on that, we keep getting this phrase of a
    rate shock and so forth being bandied about, and I am trying to
    figure out why that is happening. Like, what is afoot with it?
        So if the industry is the one that is putting out this rate
    shock narrative when in fact there is going to be good
    stability for the great majority of consumers out there and
    actually reduce premiums for many, if the industry is doing it,
    subscribing to this narrative, I can only surmise that they are
    doing it because they are getting ready or setting the table
    for some potential rate gouging.
        Now, if the industry is not intending to do that, and I
    will give them the benefit of the doubt for the moment that
    they don't want to rate gouge, that they do just want to
    present the straight story on it, then what is really happening
    is that long time critics of the Affordable Care Act are
    putting that narrative out as a way of just fear mongering
    about the Act generally.
        Do you, Mr. Potter, you have been there, you have been
    inside that, that mindset. What is going on here? Why are we
    getting this sort of rate shock narrative being pushed out to
    Americans right now? What do you think that is all about?
        Mr. Potter. Well, insurance companies spend a lot of money
    trying to influence public opinion to influence public policy,
    and that is what is going on is to create an impression of
    something that is not reality and is not likely to be reality.
        Keep in mind, too, that these may be, the increases we are
    talking about may be what they would like to get and they would
    be able to get in the absence of the Affordable Care Act, but
    we have--there are provisions in the law that will require
    reviews of excessive rate increases, and----
        Mr. Sarbanes. Thank goodness for that.
        Mr. Potter. Yes. So, just because they say they want to do
    this or plan to do this doesn't mean they are going to be able
    to do this.
        Mr. Sarbanes. So, at the end of the day, it is a completely
    nonconstructive exercise.
        Mr. Potter. It is.
        Mr. Sarbanes. The key is nothing to do this, to put that
    narrative out. It just puts people on edge and it is going to
    make it harder for us to make this thing work, and it can work
    if we put our heads behind it.
        Mr. Potter. You are right. And keep in mind again, we are
    talking, as you noted, about a very small segment of the
    population. But the intent here when you talk about rate shock,
    which is a crock, if you ask me, is nothing more than to try to
    get the impression that we are talking about the whole
    population, and it is not that at all. It is a small percentage
    of the population.
        Mr. Sarbanes. Rate shock is a crock. Thank you. I
    appreciate that.
        Mr. Burgess. Gentleman's time has expired.
        Chair recognizes the gentleman from Louisiana, Dr. Cassidy.
        Mr. Cassidy. OK, Mr. Potter, if rate shock is a crock, why
    does Massachusetts, which has the beta version of Obamacare,
    which has exchanges, nonprofit insurance companies; i.e., no
    marketing apparently and no need to do actuarial testing and
    has MLR requirements, they have the highest small business
    premiums in the Nation? Now, it doesn't make sense to me that
    if the beta version is giving us this, that there won't be a
    rate shock.
        Mr. Potter. Massachusetts is a great State. It is a
    prosperous State. It also has some of the best medical
    facilities in the country. Health care in Massachusetts is
    expensive. It is much more expensive in Massachusetts than in
    many other States.
        Mr. Cassidy. So you don't draw a connection between the
    fact that they have Mass Health and the fact that they have
    higher premiums is just a function of the providers charging
    more.
        Mr. Potter. Providers have always charged more in
    Massachusetts, so that is----
        Mr. Cassidy. They have had a rate of growth that exceeds
    the rest of the Nation since putting in Mass Health, I think
    that is what it is called, so again, it is your position,
    though, that there is nothing inherent. They have got nonprofit
    insurance companies, et cetera, that there is nothing inherent
    in the plan that contributes to the upward pressure.
        Mr. Potter. I think that in the plan, the things that are
    in the Affordable Care Act to mitigate the cost increases, you
    are not going to see necessarily, as I said, a lot of cost
    increases in this country.
        Mr. Cassidy. Well, I guess we have to agree to disagree
    because Mass Health seems to belie what you are saying.
        Secondly, you spoke negatively of the plans that people
    would afford, suggesting that they are basically catastrophic,
    and let me just hold up the Kaiser Family Foundation, and
    Kaiser is kind of all in for Obamacare, but it points out that
    the average small business or the average business has an 80
    percent actuarial value. We know from McKenzie that about a 30
    percent of businesses will dump their employees into the
    individual market. I mean, that is according to the McKenzie
    survey, and so then they will probably choose the bronze plan.
    And the Kaiser Family Foundation study shows that these people
    will go from something of higher actuarial value to something
    of lower actuarial value and that deductibles in the employer
    plans are about $1,900, but their deductibles, their out-of-
    pocket will be as much as 6,000 and higher for a family in the
    exchange.
        And they compare the bronze level plan, Kaiser Family
    Foundation does, with that of a catastrophic policy. So I guess
    if your position is the catastrophic policy is no good and yet
    people will most likely be on a bronze level plan with the
    catastrophic-type coverage, are you indicting the bronze level
    plan?
        Mr. Potter. Not at all. The catastrophic plan, while not as
    generous and will have higher deductibles, you are right, than
    the other plans. It still will be far better than a lot of the
    policies that are being marketed in this country. I have met
    people----
        Mr. Cassidy. But again----
        Mr. Potter. Congressman, I have met people who are $50,000
    a year families, policies with $50,000 annual deductibles. They
    pray every night they don't get sick.
        Mr. Cassidy. So the nice thing about an HHA plan currently
    is that you can actually prefund on a tax preferred basis, and
    you actually have that to meet your front-end cost. Under the
    bronze plan, there are actually deductibles and copays that
    will have to be hit up to $4,000 before you get complete
    coverage. There is no first dollar coverage. I suppose the
    employer could elect to go to an HHA. The current rules are
    prejudiced against that. I think that we are hearing a mixed
    message from what you are saying and what the facts are.
        Dr. Holtz-Eakin, at a later time you can tell me why your
    name is hyphenated, but that is OK.
        Mr. Holtz-Eakin. It is a long story. Maybe another time.
        Mr. Cassidy. Listen, let's assume that what our colleagues
    say on the other side of the aisle, which I actually agree
    with, as long as President Obama is President we are not going
    to repeal Obamacare. I mean, he has got too much invested. What
    could we do--if it is the law of the land, what could we do to
    bring premiums down.
        Mr. Holtz-Eakin. Certainly the pressures and premiums come
    from the underlying growth in health care costs, and I think
    there is now a bipartisan consensus that nothing has really
    been done to break that trend. There is the layer that comes
    from taxes and mandates to raise those premiums, and one could
    modify those as well, and then the rest of the plan is just
    large amount of puts and takes because, you know, some people
    will do better and worse because they are going to redistribute
    from one group to another.
        Mr. Cassidy. Let me ask you----
        Mr. Holtz-Eakin. And that is that----
        Mr. Cassidy. I think empirical data shows that consumer-
    driven health care have lowered cost.
        Mr. Holtz-Eakin. Sure.
        Mr. Cassidy. Would you agree that if we could more
    encourage consumer driven health care that we would have the
    same trend we have been having that that this is lowering cost
    if that could continue under the ACA?
        Mr. Holtz-Eakin. Allowing people greater choice for plans
    that match their needs and provides some competitive pressure
    has always worked.
        Mr. Cassidy. OK.
        Mr. Chairman, I yield back.
        Mr. Burgess. Gentleman yields back his time.
        The chair recognizes Dr. Christensen 5 minutes for purposes
    of questions.
        Mrs. Christensen. Thank you, Mr. Chairman. And while we all
    agree that we could work to build on what the Affordable Care
    Act needs to strengthen Medicare, I just want to make it clear
    for the record that Medicare is not going broke. Costs have
    grown by less than 2 percent over the past 3 years and private
    insurance costs have really always grown much faster than that.
        Let me see if I can get two questions in. The Affordable
    Care Act takes a number of steps to ensure that Americans have
    access to quality affordable coverage, that it is there when
    they need it, and these new protections has been discussed with
    me and you, Mr. Potter and Mr. Green, offers stark contrast to
    some of the junk insurance that is on the market today, some of
    which is in my district, unfortunately.
        All the plans sold in the exchange will have an actuarial
    value of 60, 70, 80, or 90 percent, and plans will have to cost
    essential--cover essential health benefits and also offer
    preventive care with no cost sharing. So these requirements
    will significantly increase the value of insurance coverage for
    millions of Americans. The cap on out-of-pocket spending
    guarantees that individuals with serious health needs will
    never again face endlessly increasing cost sharing. In order to
    receive needed care, the end of lifetime limits on coverage and
    the phase out of annual limits ensure that coverage remains
    intact even if an individual's health care needs increase
    dramatically in a given year or as the individual grows older.
        So, Mr. Potter, all of these seem to me like common sense
    elements of quality insurance. So can you tell us why, in your
    experience, the insurance companies you used to work for are
    opposed to these reforms?
        Mr. Potter. They make a great deal of money selling
    policies that are inadequate, and if you are selling policies
    you don't have to pay very much out in claims, that goes right
    to the bottom line, and you are able to increase your profit
    margins, and why----
        Mrs. Christensen. And I guess that is why they are not
    going broke either.
        Mr. Potter. That is why they are not going broke and they
    are able to maintain their profit margins because of pressure
    from Wall Street they do these things, but they--and they have
    invested quite a lot of money, some of the biggest companies
    buying smaller companies that specialize in limited benefit
    plans that can almost guarantee that someone is going to be
    underinsured if they get sick.
        Leslie Elder didn't plan to get breast cancer. My son
    didn't plan to break his hand last year and find, because he is
    in a high deductible plan, that he is paying a lot of money out
    of pocket. He, by the way, before the Affordable Care Act was
    passed, was told--he was in the individual market--that his
    policy was going to be increasing 66 percent unless he switched
    policies and go into a policy that had a deductible that is 10
    times what he had been paying.
        So, again, we--hindsight is a lot clearer than looking
    ahead. We know what has been happening and the price gouging
    that has been going on, and really we are talking about profits
    here.
        Mrs. Christensen. So when the insurance companies say they
    want to offer choice and provide new low cost options, you are
    talking about these junk things----
        Mr. Potter. That is exactly right.
        Mrs. Christensen [continuing]. That are being sold on the
    market for big profits.
        For consumers young and healthy enough to be able to afford
    coverage in the individual market prior to reform, the coverage
    they had was really only an illusion. Insurance raised rates,
    high cost sharing disappeared when the consumers really needed
    them, and we saw this in many of the hearings that we had
    leading up to health care reform, of which there were many.
        A recent analysis found that the premiums in the individual
    market are so unstable that 80 percent of plans raise premiums
    above the price consumers were quoted when they applied for the
    coverage. This so-called affordable option that my Republican
    friends think existed before health reform are really unstable
    and unreliable. It is also wrong to call today's low premium
    plans affordable because of all of the other charges that hit
    consumers as soon as they actually need the insurance.
        And these plans set hard annual and lifetime limits on the
    amount of care coverage which leaves consumers completely in
    the lurch if they ever have a serious medical need as the
    person you spoke about.
        So, Mr. Potter, the studies my Republican friends are
    relying on today are focusing on comparing low premium plans
    available to day to premiums and plans that will be available
    under the Affordable Care Act. Would these premiums likely have
    stayed stable and provided real coverage if a person got sick?
        Mr. Potter. Not in the old world. Not in today's world.
    They would not have remained stable. We have seen premium
    increases over the years, and they would continue.
        Mrs. Christensen. So, this is just another reason that
    comparing past premiums in the individual market to future
    premiums makes no sense. My Republican friends ignore the
    subsidies available to consumers, they ignore the key limits on
    cost sharing when they compare real quality coverage to the
    bait-and-switch insurance available today.
        So, thank you for your answers, and thank you, Mr.
    Chairman. I yield back.
        Mr. Burgess. Gentlelady yields back.
        The chair recognizes the gentleman from New Jersey, Mr.
    Lance, 5 minutes for the purposes of questions.
        Mr. Lance. Thank you, Mr. Chairman, and good morning to the
    panel.
        To you, Mr. Potter, I am concerned about pre-existing
    conditions, as I know you are from your testimony, and I think
    we should work together regarding that issue.
        The Centers for Medicare and Medicaid Services recently
    announced that they were no longer accepting applications for
    the pre-existing condition program created by the health care
    law and I think that this is a challenge that we have to work
    together to solve. I think this could lead to countless
    chronically ill Americans, including the vast majority of the
    rare disease community from not receiving treatments, and I
    have the honor of chairing with Congressman Crowley of Queens
    in New York City the Rare Disease Caucus, and recently our
    leadership here in the House on the Republican side, Speaker
    Boehner, Majority Leader Cantor, Whip McCarthy, Conference
    Chair McMorris Rodgers, who serves on this committee, Chairman
    Upton, Chairman Pitts, and Dr. Burgess sent a letter to the
    President regarding the fact that the Centers for Medicare and
    Medicaid Services announced that they were no longer accepting
    applications for the pre-existing conditions program.
        I am wondering what your thoughts might be as we move
    forward to try to address this issue together since one of the
    promises of the Health Care Act was that this program would be
    put in place and that we would have solved this problem but
    clearly we need to do more work on the area.
        Mr. Potter. When you are segmenting--pardon me. When you
    are segmenting people with pre-existing conditions into high
    risk pools, by their very nature they are going to have people
    who are sicker and who will have higher medical cost, and one
    of the reasons why it is important to move to at least a
    modified community rating approach to providing health coverage
    is that you can broaden the risk for everyone.
        Keep in mind that people who are sick, who have pre-
    existing conditions and might look to get coverage through a
    high risk pool often may not be able to work. They may not have
    the ability to buy into a high risk pool. One of the reasons
    why maybe we haven't seen as much uptake in the high risk pools
    in the States is because the premiums are expensive and the
    people who are sick and who need them just often simply can't
    afford to buy them. So we do need to make sure that people who
    have pre-existing conditions are taken care of.
        We are all in this together. I think that if we can look
    beyond our own current circumstances, we might realize that a
    friend of ours or a brother or a daughter or a son might have a
    pre-existing condition and have need for medical care, so we
    have got to look beyond our own current situation sometimes.
        Mr. Lance. The $5 billion program created by PPACA was
    intended to help individuals with pre-existing conditions
    through January 1st of next year, and as I understand it,
    despite lower than expected enrollment, CMS announced it would
    no longer enroll individuals, and it seems to me this is a
    reminder, and there have been several, that the cost of PPACA
    are significantly understated, and those who may need help are
    no longer going to be able to enroll in the program.
        Mr. Potter. It is possible, but also there is not a great
    deal of awareness, I don't think, of coverage that is available
    or the high risk pools. Leslie Elder, as CNN reported,
    conceivably could have been enrolled in a high risk pool in
    Florida, but she and her husband just simply were not aware of
    the existence of it, so at the end of her life, conceivably she
    died after the Affordable Care Act was passed and she might
    have been able to have enrolled in a plan that they could have
    afforded but it just wasn't something that was available or
    they were aware of its existence.
        Mr. Lance. It might have been available, but from your
    perspective, she was not aware that it was available.
        Mr. Potter. That is what was reported and her husband said
    he was not aware of it as well. I talked to him just recently
    and he wasn't aware that it could have been available to them.
    So these are not--you know, States don't necessarily have large
    marketing budgets like insurance companies do.
        Mr. Lance. I think we have to work on this issue together,
    and I am sorry that PPACA has not reached its promise in this
    regard, particularly regarding the rare disease community of
    great interest to me since I chair that caucus with Congressman
    Crowley of the neighboring State of New York, and I think we
    have to work together and do a better job, and I think that was
    the intent of the leadership position in the letter written by
    Speaker Boehner and our other leadership to the President as we
    try to solve this issue together.
        Thank you, Mr. Chairman.
        Mr. Burgess. The gentleman yields back.
        The chair recognizes the gentleman from Georgia, Dr.
    Gingrey, 5 minutes for questions, sir.
        Mr. Gingrey. Mr. Chairman, think you. I want to reflect
    back just for a minute on the line of questioning between Mr.
    Sarbanes from Maryland and also Mr. Cassidy from Louisiana with
    Mr. Potter, and I think, Mr. Potter, I am going to paraphrase
    this a little bit but the quote being rate shock claims are a
    crock. I wonder how he feels about the President's claims about
    the effects of sequester as he went around the country several
    weeks before sequester went into effect and indeed closing the
    White House tours for our families and young people who are
    coming to the Nation's capital to see the people's House and
    have an opportunity during upcoming spring break.
        That being said, I am going to direct my first remarks to
    Dr. Holtz-Eakin. Dr. Holtz-Eakin, as a former Director of the
    Congressional Budget Office, you are well aware of how
    legislative decisions are scored and how they affect our
    economy. Your current organization, American Action Forum,
    released a survey which found that for a 27-year-old in
    Atlanta, where I hang out, the age band compression to a 3-to-1
    rating would result in a 27 percent increase in premiums. Now,
    these are young people above the age of 27, by the way. Ms.
    Capps earlier stated that I was ignoring the fact that young
    people up to the age of 26, many of them are on their parents
    health insurance policy, but we are talking about people that
    are beyond that. 27 percent increase in premiums.
        These individuals, as you are aware, Dr. Holtz-Eakin, face
    uncertain job prospects and record education debt. Many of
    them, of course, stayed in school because they couldn't find a
    job and they continued on Stafford loan program and, you know,
    building up more and more education debt, hoping at the end of
    that time to be able to find a job.
        Well, the penalty for not purchasing insurance next year
    will be $95, and many of these 27-year-olds, 28-year-olds
    haven't found a job yet. In some cases, a 27-year-old making
    only $33,500 a year will see premiums increase roughly $800.
    So, Dr. Holtz-Eakin, in your opinion, will young people be more
    likely to purchase expensive health insurance or pay the
    relatively low fine next year?
        Mr. Holtz-Eakin. Well, thanks for your question. If I could
    at the outset, can I just for the record make it clear that
    this survey was entirely my idea. Mr. Potter insinuated that
    all such studies are bought by insurance companies. We thought
    it up, we designed it, we requested the information because of
    our longstanding interest in this legislation, and the results
    were delivered in a blind fashion. I have no idea who
    responded, and the aggregate data were released by us as a
    matter of public information.
        What the data say are pretty clear that if these rate
    increases take place in markets, it will be cheaper to pay the
    penalties than to purchase the insurance.
        Mr. Gingrey. Thank you, Dr. Holtz-Eakin.
        Mr. Carlson, I am aware that you have decades of experience
    as a health care actuary. In fact, without you, insurance
    companies would go broke. In your opinion, if these young
    people that Dr. Holtz-Eakin referenced failed to purchase
    health insurance, how would premiums react for the rest of the
    population if fewer and fewer of these young people, beyond the
    age of 26, particularly, stay out of the market?
        Mr. Carlson. Well, even with the current age rate and
    limitations in most States, which is 5-to-1, there is a bit of
    a subsidy going from the younger generation to the older
    generation, so we would expect that their--if those younger
    individuals do not enroll, if their premium rates are higher
    than what they are willing to pay, there would be an impact of
    increase in the rates for the rest of the industry.
        Mr. Gingrey. Well, let me interrupt you for just a second
    and thank you for that answer. I have been chiefly concerned
    about the effects of the age band compression provisions on
    these young people we are talking about, and as you know, the
    3-to-1 rating does not reflect the true difference in cost of
    care. You are an actuary. Right now, 42 States have age rating
    bans of 5-to-1 or more.
        Do you think that a federally directed age band is the best
    way to direct costs or should the States themselves be allowed
    the option to make actuarially accurate age band laws, and I
    say that because I feel very strongly that the States should be
    able to do that, and that is what this bill, the Liberty Act,
    Letting Insurance Benefit Everyone Regardless of Their Youth is
    the acronym to--if the States don't go and deal with this, then
    the default should be 5-to-1.
        If you--Mr. Chairman, if you will bear with me and let the
    gentleman answer that question.
        Mr. Carlson. I can't comment specifically on the policy of
    whether we should allow States to set their own limitations,
    but I will say that if States are allowed to use the 5-to-1 age
    rate and as many of them do now, you know, the results of our
    study would be in effect reversed to say that the rates for the
    younger individuals would be significantly less.
        Mr. Gingrey. And Mr. Chairman, this is a bipartisan bill. I
    would like to again urge my colleagues to sign on to it. It
    solves the problem, and I yield back.
        Mr. Burgess. The gentleman's time has expired.
        The chair recognizes the gentleman from North Carolina, Mr.
    Butterfield, 5 minutes for questions, sir.
        Mr. Butterfield. Thank you very much, Mr. Chairman, and
    thank the three witnesses for their testimony today. Today we
    have another hearing, ``Impact of Obamacare on America's Health
    Insurance Premiums.''
        The title makes a lot of sense, Mr. Chairman, if we are
    talking about how Obamacare brings down the affordable premiums
    that millions of Americans faced before the Affordable Care
    Act, but trying to sell us the story that banning insurance
    company discrimination and creating a free and fair marketplace
    will raise premiums, that is just wrong.
        Now, let's just take a look at a story that will not be
    uncommon in my district or most districts across the country.
    Let's say a 35-year-old single man who doesn't smoke and is
    just above the poverty line, making about $12,000, that is
    1,000 bucks a month, $12,000 a year, he doesn't have much
    savings and any medical bills would put him in real trouble.
        Before Obamacare, that constituent could have gone online
    and found a plan from a big insurance company that cost him
    $1,400 a year and had a $10,000 deductible and he would have to
    pay 30 percent coinsurance on every dollar of medical care he
    received.
        But now let's look at the options after Obamacare. If the
    Governor of my State had been wise enough to expand Medicaid
    and the legislature wise enough to expand Medicaid, the
    constituent would have had the option of Medicaid, but on the
    exchange, the constituent will get a tax credit to keep his
    premiums at about 2 percent of his income, which means he will
    pay $250 a year instead of the $1,400 he would pay for the
    current plan. He would also be eligible for cost sharing
    subsidies that will cut his out-of-pocket spending to around
    $2,000.
        So what does that mean? Instead of paying more than $1,400
    in premiums, a $10,000 deductible and 30 percent of all costs,
    the constituent will see his premiums drop to about $250 a year
    and he will have a real quality insurance that caps his out-of-
    pocket spending around $2,000.
        Now, that is a real savings. And so that is my lead up to
    my question, Mr. Potter. Let me ask you about this. This
    constituent that I have been using as a hypothetical will be
    paying a lot less for coverage under Obamacare, but even if
    another plan out there offered lower premiums, would it really
    offer dependable coverage of the way plans will under the
    Affordable Care Act?
        Mr. Potter. The Affordable Care Act is really important to
    make sure that people are getting, again, value more than they
    are today. I mean, we need to, as we are looking at this, to
    understand that when we are talking about the cost of
    insurance, we also--and the cost of care, we have to go beyond
    just looking at the cost of premiums, too. We have to look at
    what people's obligations are to pay out of pocket, and so
    there are limitations in the law that would make these $50,000
    family deductible plans a thing of the past.
        And you are right about your individual that you are using
    as an example, that that individual would be paying less. And
    also, frankly, most of the people in this that we are talking
    about, the young people will also be getting benefits and not
    be facing these increases unless, for some reason, insurance
    companies decide and can get away with the price gouging that
    they seem to be intending to get away with, but most young
    people will get--either they will be eligible for the Medicaid
    program or subsidies because most of these folks have
    relatively lower income.
        Another thing to keep in mind, too, is that young people
    don't necessarily want to be uninsured. Many of them don't have
    coverage now because they haven't been able to afford it. This
    law will enable many of those people to come into coverage for
    the first time, so they will be able to get coverage. It is not
    that they want to remain naked as they say in the insurance
    industry or consider themselves young invincibles necessarily.
    They want to get coverage, and I can also say, guarantee you
    this, the insurance companies will be spending a lot of money
    marketing to attract young people. That is where you will see,
    when the advertising starts, that is a target market they are
    going to go after to make sure that they sign up for policies.
        Mr. Butterfield. So not only does this guy save money on
    front end, he saves money on back end with co-pays and all of
    the other stuff.
        Mr. Potter. That is correct.
        Mr. Butterfield. Well, thank you, and thank all of three of
    you.
        I yield back, Mr. Chairman.
        Mr. Burgess. The gentleman yields back.
        The chair recognizes Mr. Griffith from Virginia 5 minutes
    for questions.
        Mr. Griffith. Thank you, Mr. Chairman.
        In keeping with what Mr. Shimkus said in regard to, you
    know, we are trying to figure out, since we didn't have
    hearings before, trying to figure out now where the problems
    are and where we can fix things. I have been brought to my
    attention by a constituent at a Farm Bureau dinner that his
    daughter had a serious problem and it was brought on in part by
    Obamacare.
        She is living at home and is a full-time student, but
    because she is an industrious young lady, she is also a full-
    time employee. So she is carrying a full load in college, she
    is paying for her own way, she is a full-time employee, and
    because of that she is not eligible to stay on her parent's
    insurance because there is insurance offered through her
    employment, which she would be able to stay on her parent's
    insurance as a part of the family plan at no cost to herself
    because they are already paying for mom, dad and other
    siblings, but it will cost her, and I don't remember the exact
    dollar amount, but I recall it being in excess of several
    hundred dollars per person, or excuse me, per this young lady,
    it is going to cost her per month and is of great expense to
    her, and so I guess I would ask you, Mr. Carlson, have you
    heard of similar incidences where, you know, the best
    intentions of the Obamacare or PPACA plan have actually led to,
    in this case, this young lady having to spend a lot more money
    in order to be insured because she is out working hard, going
    to school and living at home?
        Mr. Carlson. Well, I am not aware of any specific
    instances, but what you are describing there certainly is a
    case that would sound like it makes sense to me and is
    possible.
        Mr. Griffith. Yes. And you know, we are just trying to
    figure out where the problems are, and one of the real
    concerns, and I will turn to you, Mr. Holtz-Eakin, is--and Mr.
    Lance referenced it earlier. The Washington Post recently
    reported that they are not being--a lot of these folks with
    pre-existing medical problems are going to be blocked from the
    program that was designed to help them, and particularly the
    Post story highlighted the plight of a 60-year-old Virginia
    woman who wished to only be known as Joyce who is battling
    Stage IV breast cancer, and because she didn't know earlier
    that the plan was available for pre-existing conditions and a
    high risk or high expense, she was trying to fill her paperwork
    out when she discovered that there was a new deadline that had
    been applied, and, you know, the question is, are we making
    promises we can't fulfill when we say we are going to cover
    everybody, and then this lady at the time was swinging in the
    balance, they don't know whether she got her application in in
    time or not, but the Postarticle says they were going to stop
    taking new applications no later than March 2nd, and I contrast
    that with the fact that the House Republicans had a plan at the
    time of the passage of this bill that would fully fund high
    risk pools to ensure Americans got the treatment that they
    needed.
        Now, I guess my question is, if we don't have the money
    currently to take care of these high risk individuals with pre-
    existing conditions, such as this lady who wished to be known
    as Joyce, do you believe that we should divert funding from
    other parts of the so-called Affordable Care Act towards these
    high risk pools that offset the cost of coverage for
    chronically ill so that we can actually address the real
    problems that have been existed in our health care system?
        Mr. Holtz-Eakin. I certainly believe that this story, while
    tragic, is hardly a surprise. From the beginning I have been
    concerned about the design of the high risk pools. There were
    incentives for people to go uninsured, believe it or not,
    before they could be eligible to come in these pools. They
    operated side by side with State pools that were often much
    better designed and got better enrollment, and now they have
    stopped enrollments entirely. So, obviously there needs to be
    both a redesign in the criteria for eligibility in the way that
    the pools are offered, but also the funding, and getting
    funding out of elsewhere in this law I think would be a
    sensible thing to do.
        Mr. Griffith. And also, I would have to say that if this
    funding mechanism didn't work as it was promised to work and it
    that didn't have the ability to follow through because they are
    running out of funding, we also saw the long-term care
    insurance didn't work exactly the way they thought it was going
    to. They never got it off the ground because of that, which I
    appreciate pulling the plug when it wasn't going to work.
    Doesn't that call into question for both you and for just the
    average human being that if two high profile parts of the plan
    didn't fit in the model that they said it was going to fit,
    that the entire PPACA plan is probably going to cost us a lot
    more money than what the American people were told when it was
    passed?
        Mr. Holtz-Eakin. I think that is right. I mean, there are
    two perspectives on that. The first is the notion of fulfilling
    the promise of affordable care, and here the fundamental
    problem has not changed. Americans spend not quite 20 cents out
    of every national dollar on health care, the Affordable Care
    Act defines affordable as 10 percent of your income, which
    means, by definition, not all of us can have affordable health
    care, and the only way to get people under 10 percent is to
    raise someone else's cost up perhaps a lot, and that is done
    through a variety of taxes, mandates, premium increases, and
    the law will never add up for everybody in the United States.
    It cannot.
        The budgetary costs are extraordinary, and my fear is that
    it will vastly outstrip the resources that have been devoted to
    it, particularly if employers follow their incentives and put
    many more people in the exchanges and higher premiums than we
    anticipated.
        Mr. Griffith. Thank you, Mr. Chairman. I yield back.
        Mr. Burgess. Gentleman's time has expired.
        The chair recognizes the gentleman from New York, Mr.
    Engel, for 5 minutes for questions, sir.
        Mr. Engel. Thank you very much, Mr. Chairman, and thank you
    for holding today's hearing, Mrs. Capps as well.
        Mr. Potter's testimony is an excellent reminder of the
    terrible practices routinely employed by the private health
    insurance industry prior to the passage of the Affordable Care
    Act. Denying children with pre-existing conditions health
    insurance policies, canceling coverage for people once they
    became ill, applying lifetime limits to care, these practices
    were commonplace in the individual insurance marketplace before
    we passed the law.
        There were terms we legislators have all used countless
    times over the last several years, but Mr. Potter's testimony
    which I read, reminds us these things were done to people. Our
    constituents, they needed health care and they were denied and
    some of them died because of it.
        Their stories are a sad reminder. It is unacceptable to
    return to the status quo of the private health insurance
    industry by repealing the Affordable Care Act, and I wanted to
    say that before I asked my question.
        Now, let me ask this. Private insurance companies have been
    interested less in insuring those who might actually need care,
    instead have worked hard to insure the healthiest and least
    likely to incur major medical expenses and that is why I
    supported a public option in the Affordable Care Act, but
    unfortunately we weren't able to get it through, but for my way
    of thinking, we wanted to ensure that those who were ill or one
    of the estimated 129 million Americans with pre-existing
    conditions, that they have health care coverage.
        In the absence of a public option, I am very pleased that
    the strict consumer protection found in this law will be fully
    implemented by next year. So, Mr. Potter, as someone who has
    worked in the health insurance industry, do you believe any of
    the consumer protections, including the age rating requirements
    as outlined by the ACA, should be changed?
        Mr. Potter. I do not. They are very important consumer
    protections and they need to stay in place. They need to be
    implemented. The insurance companies can accommodate. The law
    will change the culture of the insurance business for the
    better.
        One of the objectives of the Affordable Care Act is to try
    to get us to a fairer system. The United States certainly has
    some of the best health care facilities in the world, some of
    the best doctors in the world. I don't think anyone would
    dispute that. The problem we have is access to those great
    facilities and those good doctors. We have one of the most
    inequitable health care systems on the planet. We rank below
    Bangladesh when it comes to fairness.
        So we need to change that. That is one of the objectives
    here, and end some of these discriminatory practices that have
    been prevalent in the industry for many, many years that have
    led to situations in which people, when they get sick, just
    can't get coverage, and that could be every one of us in this
    room or someone we know. We need to keep that in mind.
        Mr. Engel. Thank you. Let me also say that I am glad that
    the ACA included rate review requirements for those companies
    looking to raise their rates by more than 10 percent. I think
    it is worth noting that since the rate review provisions went
    into effect, the proportion of proposed rate increases, over 10
    percent declined from 75 percent in 2010, to 34 percent in
    2012, to less than 15 percent so far in 2013. And I am also
    pleased that the law established clear medical loss ratio, MLR
    requirements which have resulted in $1.1 billion being returned
    to 13 million Americans.
        So, let me ask you, Mr. Potter, I believe the combination
    of these two provisions are helpful for health premium pricing
    transparency. Are there additional steps that Congress should
    take to better ensure significant portion of patients' premium
    dollars being used to in medical care and not PR campaigns like
    the ones you discuss in your written testimony?
        Mr. Potter. I think even more transparency is in order. It
    is a very good start but to be able to know how these companies
    spend our premium dollars. Pardon me. When the individual
    mandate becomes effective, we are going to be, as you said, we
    don't have the option of enrolling in a public option. We will
    have to be buying coverage from private insurance companies. We
    ought to know a heck of a lot more about how those companies
    are spending our premium dollars, so even greater transparency,
    in my view, greater granularity about where our premium dollars
    are going would be something I think that this committee might
    want to look into.
        Mr. Engel. Well, thank you very much, and let me say in
    conclusion that status quo of health insurance plans before the
    ACA, as far as I am concerned, was unacceptable, and therefore,
    I think when we analyze any impact on premiums, it should a
    true apples-to-apples comparison fully taking into
    consideration the quality and comprehensive nature of plans as
    well as taking into account the availability of subsidies for
    those making below 400 percent of the Federal poverty level.
        I thank you, Mr. Chairman. I yield back.
        Mr. Burgess. The gentleman's time has expired.
        The chair recognizes the gentlewoman from North Carolina,
    Mrs. Ellmers, 5 minutes for questions.
        Mrs. Ellmers. Thank you, Mr. Chairman. And thank you to our
    panel.
        Mr. Potter, my line of questioning is for you. Are you a
    health care professional?
        Mr. Potter. I have been. I am not now.
        Mrs. Ellmers. You were. What was your level? What was your
    title?
        Mr. Potter. I was vice president of corporate
    communications for CIGNA Corporation. Before that I was with
    Humana.
        Mrs. Ellmers. Are you a physician?
        Mr. Potter. No, ma'am.
        Mrs. Ellmers. Are you a nurse?
        Mr. Potter. I am not.
        Mrs. Ellmers. OK. So you don't--actually, you have not
    earned a degree in any type of health care profession?
        Mrs. Ellmers. That is correct.
        Mrs. Ellmers. OK. Well, I am a nurse, OK, I have been for
    over 21 years. And I want to go to your example, Ms. Leslie
    Elder, because I, too, have a mother and--had a mother, my
    mother died at age 73. How old was Mrs. Elder when she died?
        Mr. Potter. Sixty-three.
        Mrs. Ellmers. She was 63. And you had mentioned that she
    had a treatable--chronic but treatable condition and then I
    think later you mentioned that she had breast cancer.
        Mr. Potter. She did.
        Mrs. Ellmers. And that she had died of breast cancer.
        Mr. Potter. She died of Hodgkin's lymphoma, as I recall.
        Mrs. Ellmers. So she had cancer, a form of cancer.
        Mr. Potter. That is correct.
        Mrs. Ellmers. Now, I am assuming that she had gotten a
    diagnosis. She didn't have health care insurance prior to this
    point?
        Mr. Potter. What happened is her husband is a small--was a
    small business person. He owned an auto repair business.
        Mrs. Ellmers. Did she have--yes or no, did she have health
    care insurance at the time of her diagnosis?
        Mr. Potter. She did when she was first diagnosed, but after
    she was--after her initial treatment, the insurance companies
    raised their rates on the policy, so they had drop to it.
        Mrs. Ellmers. I had the opportunity very recently to
    actually visit the cancer center in my hometown of Dunn, North
    Carolina, and I actually had this very conversation with them.
    They are doing excellent work.
        And one of the things that I wanted to clarify was that
    what happens with someone who gets a diagnosis of cancer if
    they are not insured, you know, where does that go and unable
    to work. And, you know, oddly enough, Medicare disability is
    something that they can receive.
        Now, you mentioned also high risk pools and that they--that
    she and her husband were not aware of that; is that correct?
        Mr. Potter. That is correct.
        Mrs. Ellmers. And you also mentioned that this was
    something that she was receiving treatment. Now, it is curious
    to me as to how she could have been receiving treatment and yet
    not know about high risk pools and also not know about the
    possibility of being put on Medicare.
        Mr. Potter. The high risk pool was eligible for her toward
    the end of her life. She was diagnosed with breast cancer
    earlier.
        Mrs. Ellmers. OK. When was she diagnosed with breast
    cancer?
        Mr. Potter. I don't know the exact year. I think it was
    around 2002 or something like that.
        Mrs. Ellmers. And she died?
        Mr. Potter. She died last summer.
        Mrs. Ellmers. OK. So she actually had--I mean, she--her--
    she lives----
        Mr. Potter. She had a pre-existing condition, that is
    right, and that is why their premiums went up so much that they
    had to drop it because they couldn't afford it.
        Mrs. Ellmers. But the availability to get coverage after
    that was there.
        Mr. Potter. Ultimately it was.
        Mrs. Ellmers. And they did not take part in it.
        Mr. Potter. They didn't know about it, that is correct.
        Mrs. Ellmers. They didn't know because the health care
    providers did not--I mean, you know, we have discharge
    planners, we have social services, we have physicians, we have
    nurses that are giving treatment. I have a hard time believing
    that this was all taking place and that they did not understand
    this.
        Mr. Potter. Well, Congresswoman, I would suggest you might
    talk to Mr. Elder and ask him these questions. I don't know,
    but I am told----
        Mrs. Ellmers. And you mentioned the daughter and that the
    daughter said, and if I can quote you, that if she felt that if
    Obamacare had been in place, that her mother would not have
    died; is that correct?
        Mr. Potter. That is correct.
        Mrs. Ellmers. Do you have a mother?
        Mr. Potter. I certainly do, and she is 88 years old.
        Mrs. Ellmers. And you would like to see her live a good
    long life, wouldn't you?
        Mr. Potter. And she has. I have been very blessed.
        Mrs. Ellmers. And that is a blessing. And again, my mother
    died at age 73, unfortunately. She had Alzheimer's, but she
    also received very good care, excellent care because she had
    very good coverage. She was also on Medicare, but she still
    died, and that is a loss, and I understand that Ms. Elders'
    family is experiencing a loss as well, but I find it curious
    that you used her as an example of why Obamacare would be such
    a good plan to be put in place and that somehow this would have
    saved her. Is that not what you are claiming?
        Mr. Potter. The point of telling her story was to point, if
    you look at the written testimony, that they were priced out of
    being able to offer coverage.
        Mrs. Ellmers. But there was other coverage that--in fact,
    and that is understandable. But those of us in health care----
        Mr. Potter. Not during most of the time that was available
    to her.
        Mrs. Ellmers [continuing]. Understand that these are forms
    that have needed to be put in place for a long time and we are
    ready to work on those things for health care solutions;
    however, there was other availability there, so I just----
        Mr. Potter. Not during most of the time.
        Mrs. Ellmers. I am not quite sure I am understanding.
        Mr. Potter. Not during most of the time, Congresswoman.
        Mrs. Ellmers. Not Medicare?
        Mr. Potter. I can give, if you would like, I can tell you
    more about their situation so you can get----
        Mrs. Ellmers. Well, no, I don't think we need to do that,
    and my time has expired, but I find your testimony
    disingenuous. Thank you, sir.
        Mr. Burgess. And the gentlelady yields back.
        And the chair recognizes the ranking member of the
    subcommittee, Mr. Pallone, 5 minutes for questions.
        Mr. Pallone. Thank you, Mr. Chairman. My questions are of
    Mr. Potter. Insurance warn that if they are allowed to charge
    seniors only three times more for coverage than they charge
    younger people rather than five or six or 10 times more, they
    will substantially increase premiums on young people, and the
    Urban Institute recently completed an in-depth analysis of age
    rating in the ACA and determined these insured claims to be
    unfounded.
        I was going to ask unanimous consent if we could enter into
    the record this study, Mr. Chairman, by the Urban Institute,
    which I gave you there.
        Mr. Burgess. Without objection, so ordered.
        [The information appears at the conclusion of the hearing.]
        Mr. Pallone. Thank you. So, anyway, this Urban Institute
    compared the likely results of allowing insurers to charge
    older Americans five times more for coverage rather than only
    three times more and found that it would, quote, have very
    little impact on out-of-pocket rates paid by the youngest non-
    group purchasers once subsidies are taken into account. And the
    study found that premiums would stay stable for young people
    because the ACA provides unique coverage options that
    specifically benefit young Americans. The law provides for a
    low cost catastrophic health plan that is available only to
    people under 30 and it requires that it insures, allow adult
    children to stay on their parents' plan until age 26, a policy
    that has already extended coverage to more than 3 million young
    people, and most important in this study was the fact that
    young people are some of the most likely to benefit from the
    ACA's Medicaid expansion and premium tax credits.
        So, Mr. Potter, were young people served well by the
    insurance products on the market before reform, or will they be
    better off because of the ACA's new reforms and consumer
    protections? And then I would ask if insurers get their ways
    and change the age rating band, do you think they will stop
    there or will they push for other changes?
        Mr. Potter. Young people were not well served, have not
    been well served and were not before the Affordable Care Act
    was passed. They have not, obviously, had the benefit of
    getting subsidies or tax credits or the ability to enroll in
    Medicaid because of, you know, the way that the programs are
    structured right now. So they are going to be much more
    advantaged as a result of the full implementation of the law
    than they have in the past. They will be able to get coverage
    that is affordable and it is decent. A lot of the policies that
    insurance companies market to young adults are limited benefit
    plans or plans with very high deductibles. Young people are not
    immune from getting seriously ill or injured, so many of them
    find themselves, if they bought these policies, at great risk
    of themselves having to file for bankruptcy and their lives
    being ruined as a consequence.
        Mr. Pallone. Let me ask you another question. The health
    insurance marketplaces that will come online in a few months
    time are a key new tool to help consumers and small businesses
    shop for coverage. They finally make it easy to compare plans,
    you know, apples to apples, so consumers can purchase
    dependable quality coverage. Plans will be forced to compete on
    price and quality, they provide one-stop shop, reduce
    transaction costs, increase transparencies. The CBO estimates
    that these factors alone will drive premiums down 7 to 10
    percent and there is a potential for much more savings.
        I know my Republicans friends like to talk about how the
    application for premium tax credits will be too long and
    complicated, but have they looked at insurance company
    paperwork recently? The ACA eliminates the fine print loopholes
    that insurers would hide in their 100-page contracts and said
    it guarantees quality coverage and requires plans to provide a
    four-page plain language summary of benefits and coverage.
        So, Mr. Potter, when you worked in the insurance industry,
    would you say the industry was transparent and consumer
    friendly, and what do you think reforms like those in the new
    health insurance marketplaces will do to consumer costs?
        Mr. Potter. Insurance companies were anything but
    transparent and forthcoming in the information that they were
    providing to prospective customers. There was nothing like what
    has to be available now. You can now make some apples-to-apples
    comparisons among policies. You could not do that, and you
    hardly could be able to decipher information except the slick
    marketing materials you would get from insurance companies, but
    now, as you noted, they have to have summaries that are----
        Mr. Pallone. When you say now, you mean with the ACA?
        Mr. Potter. With the ACA, that is right.
        Mr. Pallone. You know, I mean, look, my own experience, you
    know, I understand what you are saying, and I really want to
    emphasize that, you know, part of what the ACA is trying to
    accomplish is to basically make it easier, you know, with the
    exchanges that you can actually figure out what is going on.
        Mr. Potter. You can.
        Mr. Pallone. And simplify it. And if you want to just
    comment on that again.
        Mr. Potter. You can be a much better informed consumer now
    than you ever had been in the past by coverage from insurance
    companies because they do have to be more transparent, they
    have to give you some understanding or better understanding of
    exactly what they will cover and what you might be having to
    expect in terms of out-of-pocket expenses if you enroll in one
    plan versus another.
        And you can do that online. In fact, you can get that kind
    of information now because that kind of transparency was
    required as of the first of this year. So, again, I said
    earlier that these changes are going to be changing the culture
    of insurance companies in the industry and for the better, and
    one of the ways that it is changing these in the culture is
    through this greater transparency, which by the way, the
    insurance industry fought. They did not want to do this because
    they have benefited significantly over the years from keeping
    us in the dark.
        Mr. Burgess. OK.
        Mr. Potter. They were buying things that weren't
    necessarily to our best advantage.
        Mr. Pallone. Thank you. Thank you, Mr. Chairman.
        Mr. Burgess. We have a lot of members who are ready to
    question before votes, so the gentleman from Florida, Mr.
    Bilirakis, 5 minutes for questions, please.
        Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it
    very much, and I thank the panel for their testimony today.
        Mr. Carlson, as we discussed earlier, how the $100 billion,
    at least $100 billion tax on health insurance will drive
    premiums higher, and I know that you have analyzed the tax's
    cumulative impact in depth. Can you explain what it means when
    you say that the Affordable Care Act constructed this tax to be
    non-deductible and why is it a non-standard treatment of taxes?
        Mr. Carlson. Well, in very simple terms, the tax is not
    considered an expense in the, you know, in an income statement,
    so it won't be charged against the company until, you know,
    after their taxes are taken out of their income or what the
    profitability is. So, in effect, that means that not only do
    they have to fund the tax, but they also need to fund an
    additional amount to reflect the taxes that they will have to
    pay on that. So, you know, as Dr. Holtz-Eakin said earlier, you
    know, you have to collect $1.50 in premium in order to pay the
    dollar of the insurer fees.
        Mr. Bilirakis. Thank you. Again, Mr. Holtz-Eakin and Mr.
    Carlson, the tax on health insurance is one of many factors
    that will cause premiums to rise. I think we have established
    that there is a real threat that small employers will be forced
    to terminate employee coverage and send their workers to the
    exchange subsidized coverage.
        What will the repercussions be if this happens, and if both
    of you can give me an answer, I would appreciate it.
        Mr. Holtz-Eakin. Well, certainly, if you do the arithmetic
    for any employer whose employees are under 3 percent of the
    Federal poverty line, it is a no-brainer to stop offering
    insurance, send individuals to the exchanges. You can give them
    a raise. They can use the after tax raise and subsidies to buy
    better insurance than you could offer them. You can pay a
    penalty on top of that and still make more money.
        And so there are overwhelming economic incentives for a
    vast numberof employees then after the exchanges. The
    implications of that, I think, are pretty straightforward.
    Number one, the Federal budget cost is going to be radically
    higher than it has been estimated to date.
        Number two, if in fact we see the premiums increase at the
    same time, those subsidies will increase per person, so again
    we get a second hit on the budget cost. This will change the
    provider networks that many of these individuals will be
    accessing so they will get disruptions in their care, and the
    labor market turmoil, I think, will be substantial, and we are
    beginning to see that with the large number of employers who
    are moving people to part-time status instead of full-time in
    order to accommodate the mandate. It is just one of the many
    potential labor market manifestations of the big implications
    of this law.
        Mr. Bilirakis. Thank you. Mr. Carlson?
        Mr. Carlson. Yes. And I will just add the $8 billion that
    starts in 2014, it is a fixed number. So if the pool of fully
    insured premiums that that amount is charged against goes down,
    in effect the rate will go up. So if you look at our study we
    have a high estimate and a low estimate, and the high estimate
    for the percentage is based on the assumption that employers,
    especially in the small group market, will drop their coverage
    and put their employees out into buying in an exchange or other
    alternatives. So we relied upon industry studies which in fact
    said that is a possibility going forward. So the more employers
    that drop their coverage from the fully insured market, the
    more likely it is that that premium rate increase will continue
    to go up further.
        Mr. Bilirakis. Thank you. Mr. Chairman, I yield back. I
    appreciate it.
        Mr. Burgess. The gentleman yields back.
        The chair recognizes the gentlelady from Tennessee, Mrs.
    Blackburn, for 5 minutes for questions, please.
        Mrs. Blackburn. Thank you, Mr. Chairman, and thank you for
    being with us today. We appreciate this.
        Mr. Potter, I want to be sure I understood you right. You
    said that we were charging people so much for health insurance
    that they couldn't afford to buy it before. You made that as a
    statement that took place before Obamacare. People were being
    charged so much that they couldn't afford to buy health
    insurance.
        Did I understand you right on that?
        Mr. Potter. You are right, Congresswoman.
        Mrs. Blackburn. Let me ask you this then. I have some stats
    from people in my district of how their health insurance
    premiums have gone up since the passage of Obamacare, and I
    want to just read through these. I have a car dealership down
    in Fayetteville. They dropped coverage because the increase was
    so much. An insulation company with 36 employees in Nashville,
    they dropped it due a multiple year large rate increase and
    administrative burdens on their plan. A consulting firm with
    two employees, a 56 percent rate increase in 2013, and that
    followed a 15 percent in 2012. A restaurant over in
    Springfield, employees no longer allowed to work more than 29
    hours a week. That is a jobs program for you, isn't it?
        An auto parts company over in La Vergne, they had had a
    management carve-out, but let's see, a 30 percent increase last
    year, not going to be able to offer coverage to everyone that
    works 30 hours or more a week. I mean the list goes on and on.
    We have got a flooring company with 30 employees, a 21 percent
    increase, and a law firm with three employees, a 16 percent
    increase this year, 38.5 percent last year. A physician's
    office, seven employees, a 21 percent increase. A commercial
    printing company, 25 percent increase. A manufacturer with six
    employees, a 25 percent increase. A construction company with
    nine employees, 15 percent increase this year followed on top
    of a 42.5 percent increase last year. Oh, here is a private
    school with 68 employees, a 17 percent increase, and a retail
    flooring store with five employees, they had a 123.27 percent
    increase that is taking place next month.
        Sir, what do you tell these employers who are trying to do
    the right thing? You thought health insurance was expensive
    before, but what do you tell them now, it is exorbitant?
        Mr. Potter. I might tell them the story of Jim and Leslie
    Elder, and I don't think it is disingenuous.
        Mrs. Blackburn. No, we are not going to go there. You have
    sat there and told that story over and over and over. And I
    have great compassion----
        Mr. Potter. Because it is an important story. And I am from
    the Great State of Tennessee and my mother gave----
        Mrs. Blackburn. No, sir, it is my time and we are not going
    to tell it again. I have great compassion for anyone whole
    loses a parent through such a situation. I have just lost my
    father and I understand what people go through. But I have got
    to tell you something right now, I think that what we have to
    do is look at what is happening to these insurance costs.
        And here is one I have got. You know, these are all in my
    district. These are real live numbers that are coming back in.
    I can tell you something right now. Have you ever heard of
    TennCare?
        Mr. Potter. I have.
        Mrs. Blackburn. OK. We had that in Tennessee and you know
    what happened there, don't you? It was a disaster. It was such
    a disaster that a Tennessee Governor, a Democrat Governor, had
    to go in and completely reshape the program.
        And let me ask you this. Have you ever heard of any, is
    there any public option health care program that you can point
    me to that actually saved money and increased access?
        Mr. Potter. Public option? We don't have any public options
    in this country.
        Mrs. Blackburn. Oh, that is not what you call TennCare. It
    was a test case for Hillary Clinton's health care. Well then,
    let me ask you this about guaranteed issue. Right here, I have
    got in '93 a 30-year-old woman in New York had an average
    premium, let's see, of $1,800 a month. New York passed
    guaranteed issue and community rating, and guess what that
    premium went to? $3,240. So you go from $1,800 to $3,240. That
    is a $1,400 a year increase after you insert government
    control. So if we don't have public option, then have you ever
    seen a government-run health care system that has increased
    outcomes, decreased costs and increased access?
        Mr. Potter. Many systems around the world have done a much
    better job of increasing access and controlling costs.
        Mrs. Blackburn. My time is about up. Mr. Holtz-Eakin, are
    there any examples you can point to there that have lived up to
    promises?
        Mr. Holtz-Eakin. There are no U.S. examples of that type,
    ma'am.
        Mrs. Blackburn. Mr. Carlson?
        Mr. Carlson. I have none.
        Mrs. Blackburn. You have none. I yield back.
        Mr. Burgess. The gentleman's lady time has expired.
        The chair recognizes the gentleman from Kentucky, Mr.
    Guthrie, 5 minutes for your questions, please, sir.
        Mr. Guthrie. Thank you very much. I thank the panel for
    being here. I would like to build on what some of my colleagues
    have talked about today and deep concerns over the rising cost
    of health insurance.
        The President when he was pushing the health care law said
    it would reduce premiums on a family of four by $2,500, and we
    have now seen it has increased by 3,000 per year and the most
    expensive portions of the law haven't been put into place, has
    not gone into effect yet, I should say.
        I come from Kentucky and in the early 1990s we actually
    were trying to be, before Tennessee, to try to set the
    standard. In the 1990s our entire insurance market collapsed in
    Kentucky. We attempted a guaranteed issue, guaranteed
    portability, modified community rating. Immediately like half
    our insurance providers left. We were down to one. We had to go
    back and redo the whole law just to get--individuals were
    completely wiped out of the market. Most companies went self-
    insured just so they could provide health insurance to their
    employees who couldn't afford it. They had to be in the ERISA
    category instead of the other category. And I would like to
    think that Kentucky just wasn't isolated. I think we just heard
    from Tennessee's example and one from New York that my friend
    brought up.
        Dr. Holtz-Eakin, Kentucky, Tennessee, are they the only
    examples?
        Mr. Holtz-Eakin. There are numerous other examples, the
    State of New York, the State of New Jersey. You can go around
    the country and look at Kentucky, Vermont, Washington State,
    all of whom experimented with this and had big premium
    problems, and in some cases, such as Kentucky, reversed course,
    having gone through it.
        Mr. Guthrie. We had to. You couldn't get insurance. None
    would even offer it, much less pay the price that it cost. So
    we have been there and it didn't work, and now we are trying to
    do this on a Federal level. And I believe even Jerry Brown, the
    Governor of California in his state of the budget, so it is not
    a Republican sitting here trying to say this is an issue. Jerry
    Brown, I don't think anybody would call him a Republican or a
    conservative, said in his state of the budget that large rate
    increases in individual markets are likely, and that is when he
    put in when he accounted for his budget.
        So the way groups will react to the market is something,
    Dr. Holtz-Eakin, that I am interested in. There is an Oliver
    Wyman study from 2009 that highlights some significant red
    flags about the impact of the health care law, and one of the
    few things is as the prices rise, obviously less healthy people
    have to maintain coverage and they are least likely to drop
    coverage even if they absorb the cost because they are less
    healthy. So then healthy individuals are least likely.
        I used to say that the only person, a healthy young person
    over 26 that will have insurance in America, are people who
    just want to abide by the law because there is no financial
    incentive to do it because you have guaranteed issue. Then it
    changed. The law was rewritten by the Supreme Court, as you
    know, so you are not even violating the by not violating health
    insurance, you are paying a tax in lieu of health insurance. So
    there is no penalty any more. That was changed by the Roberts
    court.
        But I don't see how premiums won't spiral. The whole
    concept, Dr. Holtz-Eakin, and I will give you the remainder to
    talk on this, is you bring young people into the market by
    mandating coverage and by younger healthier people in the
    market it brings down the premiums for everybody. You are
    sharing the risk. But then there is not a financial incentive
    at all or even a health incentive because of the guaranteed
    issue for a young person to enter the market. And they are not
    even mandated to do any more. They can pay a tax in lieu of
    going into the market. So can you just comment on how that is
    going to affect premiums, this premium spiral I am getting at.
        Mr. Holtz-Eakin. This is a serious issue. The whole notion
    is that you have a base level of premium cost that comes from
    the cost of health care and there is no way to change that with
    the insurance provisions. And then you want to have a large
    risk pool to take that national health care bill and distribute
    it across people. The experience in States has been one in
    which the combination of guaranteed issue-community rating
    caused the healthy to opt out, and in some cases it led to
    insurance state pool death spirals, the continuing higher
    premiums, people leave. And that has been the concern about the
    construct in the Affordable Care Act.
        Massachusetts has a--that is a similar design and it has
    now been widely noted that costs have continued to go up there
    and we are now seeing individuals hop in and out of coverage.
    The mandate is not working, and I am worried about this.
        Mr. Guthrie. Mr. Potter, do you see the construct of the
    law, the premium spiral, you don't see this as a threat? The
    construct of the law for young people to buy health insurance,
    the incentive is not there for them to buy health insurance. Do
    you think young people are going to opt out of the market and
    the premiums are going to go up? You don't think that is a real
    concern?
        Mr. Potter. I think what the real experience is we can
    speculate, but I think that, as we said before, young people
    will benefit from being able to get subsidies. They want to
    have coverage. I think most people will be wanting to enroll in
    a benefit plan.
        Mr. Guthrie. With guaranteed issue?
        Mr. Potter. If there is guaranteed issue and a requirement
    to purchase. The thing that you have to keep in mind is that in
    some of the States you talked about, if you have guaranteed
    issue without any kind of a mandate, which is why the
    Affordable Care Act was developed as it was----
        Mr. Guthrie. But the mandate, you can pay a small tax in
    lieu of paying a premium.
        Mr. Potter. We can argue as to whether or not it is an
    enforceable or a large enough mandate.
        Mr. Guthrie. If it is not enforceable, they are not going
    to be in the system. That is the point.
        Mr. Potter. Again, I will say most people want to be
    covered. It is not that they want to go without----
        Mr. Guthrie. As prices rise and they can get it when they
    need it, why would you pay for it if you can get it when you
    need it, as prices rise.
        Mr. Potter. Because you don't know when you going to need
    it. I might get sick tomorrow or my son might. My son is not an
    idiot. He will want to have coverage because he knows that he
    might get injured. I think most young people realize that they
    are not bulletproof. They will be getting coverage because they
    know things like that happen to people.
        Mr. Burgess. The gentleman's time has expired. I appreciate
    the attendance of everyone who has been at this subcommittee.
    It has been a good attendance. The ranking member and I will
    offer one last question to the panel. I recognize the gentleman
    from New Jersey for 5 minutes.
        Mr. Pallone. Thank you, Chairman.
        My colleague asked if we know of any public health care
    system that improved outcomes and controlled costs, and I will
    certainly give you one, and that is Medicare. It has lower
    administrative costs than private insurance and it provides
    great coverage, in my opinion.
        But I wanted to ask Mr. Potter a question. Opponents of
    guaranteed issue have tried to compare the ACA's guaranteed
    issue requirement to previous State experiments of guaranteed
    issue and I think this is very misleading. The ACA contains
    significant premium subsidies and responsibility requirements
    for individuals and employers. By expanding the pool of who
    gets covered, the costs increases that critics have tried to
    associate with the ACA disappear.
        Massachusetts health reform is probably an appropriate
    example. In 2006 when it enacted its comprehensive health
    reform, Massachusetts already had guaranteed issue in place.
    When the State enacted health reform similar to the ACA,
    premiums in the State's individual market fell by 40 percent
    while they rose by 14 percent nationwide.
        So, Mr. Potter, requiring that insurance companies provide
    coverage to all who apply represents a big change to these
    companies' business models, isn't that correct?
        Mr. Potter. That is absolutely correct. Most of them these
    days, their business models are based on underwriting and being
    able to try to cherry pick and exclude as many people from
    coverage as possible.
        Mr. Pallone. So do you think there is any comparison
    between the rise in premiums in States that required guaranteed
    issue in the nineties and the comprehensive nationwide reforms
    representing by the ACA?
        Mr. Potter. What the ACA does, Congressman, is taking an
    approach that is different from what some of the other States
    took and made the circumstances in those States different from
    what they will be with the implementation of the Affordable
    Care Act.
        Mr. Pallone. Do you want to just elaborate on that a little
    more?
        Mr. Potter. Again, if you have a mandate without--I mean if
    you have guaranteed issue without incentives to purchase
    insurance or without a requirement, then there will be people
    who will opt out, and that does increase the cost of coverage,
    and that is why the Affordable Care Act was constructed as it
    is, to make sure that more people will have that incentive to
    purchase insurance.
        Mr. Pallone. Let me ask you one more thing. Opponents of
    the ACA are attempting to spread fear that the law is going to
    increase costs for millions of Americans. However, the CBO and
    other analysis have shown that this notion of market-wide
    premium increases is simply a myth. First of all, 95 percent of
    the insured population in this country has either public
    coverage or employer insurance, and that is over 240 million
    people. Every objective analyst agrees that employer coverage
    will not become significantly more costly under health reform
    and a recent study found that increased employer costs
    associated with health reform were equal to.0003 percent of
    wages, which is simply too small to legitimately lead to large
    premium increases. Even the faulty Republican studies discussed
    today agree that only a subset of that remaining 5 percent of
    the market even has the potential to see a premium increase
    under health reform.
        So, Mr. Potter, you worked on messaging and public
    relations at insurance companies. Does it surprise you that
    this attention and fear mongering is occurring over such a
    small segment of the marketplace and was the individual market
    before reform a profitable sector for insurance companies?
        Mr. Potter. It doesn't surprise me at all, because it is
    just a continuation of the same kind of tactics they have used
    a lot and that I have written about quite a bit. So what they
    want to do is create an impression of something that is bigger
    than it is or even will exist and it might not. So it is
    exactly what they have done in the past. And the marketplace
    will change significantly, these companies will change a great
    deal as well as a result of this, and I think we will be seeing
    that coverage will become more affordable.
        Your point is very well taken, too. It doesn't apply. The
    vast majority of people in this country, if they get coverage
    through the workplace or through a public program, will not see
    the--they are not in the individual market, so the effects will
    be very limited.
        Mr. Pallone. All right. Thank you. Thank you, Mr. Chairman.
        Mr. Burgess. The gentleman yields back his time.
        Mr. Carlson, you are the numbers guy, so very quickly, in
    your experience has there been any industry where the industry
    has been force-fed Federal dollars that results in lower costs
    to consumers at the other end?
        Mr. Carlson. Not that I am aware of.
        Mr. Burgess. Student loans come to mind, don't they, and
    then some of the problems with the bubble in the housing
    industry. Force feeding Federal dollars into an industry
    actually can be quite deleterious, although it seems like it is
    a compassionate and good thing to do.
        Mr. Potter, I just have to say I am so grateful that the
    gentlelady from North Carolina posed the questions to you that
    she did. I must say I was reading the testimony last night and
    I thought this just doesn't sound like reality. I practiced
    medicine for almost 28 years, Parkland Hospital, Texas Medical
    Center, over 20 years in private practice in North Dallas. I
    cannot--I mean, you are an insurance company. If an insurance
    company leaves a patient, the doctor, the cancer center, those
    people don't just turn people away. You may think they do, but
    they don't. We took care of patients every day who had no
    realistic means of ever paying their bill. Even if it wasn't
    altruism involved, there is always the threat of medical
    liability for abandoning a patient. A family might bring a
    cause of action.
        So I just have been wracking my brain to think of a
    comparable clinical situation that I encountered in almost 30
    years, and there is not one. Ms. Ellmers is exactly right. The
    cancer centers that I know, they would never turn away a
    patient. They would find a way to work with them, maybe find a
    program at the medical school in the center of the State, maybe
    find a facility like M.D. Anderson Hospital to participate. But
    you wouldn't just say well, I am so sorry about your financial
    situation, I hope things work out for you. In reality that just
    does not happen.
        Now, I will say this. You worked for CIGNA. In the late
    1990s CIGNA, I think all of the large insurance companies were
    involved in what were called black box edits; slow pay, no pay,
    down coding of bundling and lowering reimbursement rates to
    physicians. The insurance industry during the nineties, I am
    glad that they are not that way anymore, but they were
    responsible for some serious stresses on the system, certainly
    from the perspective of a provider.
        In fact, providers, really we could do them a great favor
    if we would say when you take care of a person who is in this
    situation where you are not going to be paid, we will allow you
    a credit towards your taxable income. And those will have to be
    negotiated rates, but I think there are ways to deal with the
    problem. There is always going to need to be safety nets.
    Safety nets are important.
        Dr. Holtz-Eakin, this $16.5 trillion debt, that is not just
    a theory, that is an application, right? And what happens when
    the music stops? What happens when the administration goes down
    to the Bureau of Public Debt to peddle paper on a Tuesday at
    noon and nobody shows up to buy?
        Mr. Holtz-Eakin. It is not something you want to
    contemplate, Congressman.
        Mr. Burgess. Right. The interest rates begin to go upward,
    and they can go upward in a quite dramatic way. You and I will
    be inconvenienced. It will cost us more to buy a car or buy a
    house. People who depend on social safety nets, they are going
    to be clobbered when that day happens. So it is important when
    we talk about things in terms of Federal spending and debt, it
    is not just an esoteric, it is reality that people, no one of
    us, the President, no one in the Senate, no one in the House of
    Representatives knows when that day of reckoning is going to
    occur.
        The President came and talked to House Members earlier this
    week and he said I don't think you all should worry about it so
    much. That is going to be way in the future. I don't know. I
    don't have the same confidence that the President has that he
    can continue to run trillion dollar deficits every year for
    another 4 years and there is no effect on the larger economy
    and there is no effect on the dollar being the reserve currency
    of the world. I think there is going to be an effect.
        But I find this hearing fascinating because we are perched
    on the brink of the final rollout of the Affordable Care Act.
    It is something that is very difficult to contemplate. I don't
    think HHS is ready by any stretch of the imagination. You talk
    about people who are left in the lurch. I think you are going
    to have a lot of people who go to sign up on their 21 page
    application on October 2nd or 3rd and find that the system is
    not ready for them, the system does not work. You can only get
    one chance to make a first impression.
        I wish the agency would be more forthcoming to come to this
    committee and talk to us about where they are in the
    construction of the informatics piece, in the development of
    the Federal exchanges that are going to have to take place
    because 26 Governors say we don't trust the administration
    enough to set up a State exchange.
        I thank everyone for their forbearance during this hearing.
    I think it has been a good and informative hearing.
        I have a unanimous consent request, Mr. Ranking member, to
    insert an article from the Boston Herald into the record. The
    headline is ``Mass. individual health premiums highest in the
    Nation.''
        [The information appears at the conclusion of the hearing.]
        Mr. Burgess. I remind members they have 10 business days to
    submit questions for the record and I ask the witnesses to
    respond to the questions promptly. Members should submit their
    questions by the close of business Monday, April 1st, and that
    is no joke.
        Without objection, the subcommittee is adjourned.
        [Whereupon, at 11:25 a.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

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