[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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