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



 
                  HEALTH INSURANCE PREMIUMS UNDER THE 
               PATIENT PROTECTION AND AFFORDABLE CARE ACT 

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 20, 2013

                               __________

                           Serial No. 113-44


      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 Oversight and Investigations

                        TIM MURPHY, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
MARSHA BLACKBURN, Tennessee          BRUCE L. BRALEY, Iowa
PHIL GINGREY, Georgia                BEN RAY LUJAN, New Mexico
STEVE SCALISE, Louisiana             EDWARD J. MARKEY, Massachusetts
GREGG HARPER, Mississippi            JANICE D. SCHAKOWSKY, Illinois
PETE OLSON, Texas                    G.K. BUTTERFIELD, North Carolina
CORY GARDNER, Colorado               KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         PETER WELCH, Vermont
BILL JOHNSON, Ohio                   PAUL TONKO, New York
BILLY LONG, Missouri                 GENE GREEN, Texas
RENEE L. ELLMERS, North Carolina     JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        officio)
  



                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Diana DeGette, a Representative in Congress from the state 
  of Colorado, opening statement.................................     4
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
    Prepared statement...........................................

                               Witnesses

Cori E. Uccello, Senior Health Fellow, American Academy of 
  Actuaries......................................................    10
    Prepared statement...........................................    13
    Answers to submitted questions...............................   113
Chris Carlson, Actuarial Principal, Oliver Wyman Group...........    25
    Prepared statement...........................................    27
    Answers to submitted questions...............................   117
Daniel T. Durham, Executive Vice President, Policy and Regulatory 
  Affairs, Americas Health Insurance Plans.......................    33
    Prepared statement...........................................    35
Topher Spiro, Vice President, Health Policy, Center for American 
  Progress.......................................................    57
    Prepared statement...........................................    59
    Answers to submitted questions...............................   119

                           Submitted Material

Report from majority staff dated March 14, 2013..................    93
Minority memoranda dated May 13 and May 18, 2013.................    96
Letter of May 20, 2013, from Families USA to the subcommittee....   108
Letter of May 20, 2013, from AARP to the subcommittee............   110


 HEALTH INSURANCE PREMIUMS UNDER THE PATIENT PROTECTION AND AFFORDABLE 
                                CARE ACT

                              ----------                              


                          MONDAY, MAY 20, 2013

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 4:02 p.m., in 
room 2123, Rayburn House Office Building, Hon. Tim Murphy 
(chairman of the subcommittee) presiding.
    Present: Representatives Murphy, Burgess, Scalise, Harper, 
Olson, Griffith, Johnson, Long, Ellmers, Barton, DeGette, 
Schakowsky, Butterfield, Castor, Green, and Waxman (ex 
officio).
    Staff Present: Sean Bonyun, Communications Director; Matt 
Bravo, Professional Staff Member; Karen Christian, Chief 
Counsel, Oversight; Andy Duberstein, Deputy Press Secretary; 
Paul Edattel, Professional Staff Member, Health; Julie Goon, 
Health Policy Advisor; Brad Grantz, Policy Coordinator, O&I 
Debbee Hancock, Press Secretary; Sydne Harwick, Staff 
Assistant; Brittany Havens, Staff Assistant; Sean Hayes, 
Counsel, O&I Andrew Powaleny, Deputy Press Secretary; Tom 
Wilbur, Digital Media Advisor; Phil Barnett, Minority Staff 
Director; Stacia Cardille, Minority Deputy Chief Counsel; 
Elizabeth Letter, Minority Assistant Press Secretary; Stephen 
Salsbury, Minority Special Assistant; Roger Sherman, Minority 
Chief Counsel; and Matt Siegler, Minority Counsel.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Good afternoon. I convene this hearing of the 
Subcommittee on Oversight and Investigation to examine the 
impact the Patient Protection and Affordable Care Act will have 
on the premiums of every American.
    Today we are joined by several witnesses. Cori Uccello. Did 
I say it correctly?
    Ms. Uccello. Uccello.
    Mr. Murphy. Uccello? I see. Uccello like--yes, we are 
good--is a senior health fellow at the American Academy of 
Actuaries. Chris Carlson--I think I got that right--is an 
actuarial principal with the Oliver Wyman Group. Daniel Durham 
is executive vice president for Policy and Regulatory Affairs 
with America's Health Insurance Plans. And Topher Spiro is the 
vice president for Health Policy at the Center for American 
Progress. I thank the witnesses for joining us today.
    Today's hearing will focus on a question that many 
Americans are concerned about: Will the Affordable Healthcare 
Act increase the cost of my health insurance? Based on 
information provided by some of the Nation's largest insurance 
companies and by outside analysts, the answer to that question 
is yes.
    Two months ago the Subcommittee on Oversight and 
Investigation sent a letter to 17 insurance companies, 
including 15 of the Nation's largest insurers. We asked them 
for very basic information. What do you expect the Affordable 
Care Act will do to the premiums of Americans? Will they, in 
fact, be more affordable? We didn't ask them to create new 
material and we did not ask them to exclude or to focus on 
certain information or certain States. Instead, we simply asked 
them for the material they already had created to estimate the 
impact of the health care law on their consumers.
    Nearly all the material the insurers submitted showed that 
Americans can expect massive premium increases. As one insurer 
told the committee, consumers in 90 percent of all States would 
likely face significant premium increases. Another wrote to the 
committee, ``The bottom line is that the PPACA does not contain 
many provisions that will reduce costs and improve 
affordability, especially in the short term.''
    Now, to be clear, some individuals in a few States may see 
premium decreases. As identified by the insurers, these States 
are typically the ones that are already highly regulated, such 
as New York, Massachusetts, Maine, Vermont and others, but some 
of the materials submitted by the insurance industry show that 
even individuals in those States may still get a premium 
increase. And this still only represents five States. The other 
45 can expect, as the insurers told us, significant premium 
increases. Forty-five States get premium increases and five may 
see a slight decrease.
    On the day this law was signed, the President said it 
would, ``lower costs for families and businesses.'' It seems 
remarkable that a law that was passed on the basis of 
affordability will instead bring Boston prices to a small town 
of Pennsylvania that otherwise would have been successful.
    So why are costs going up? According to the materials 
provided by the companies, the Affordable Care Act mandates 
insurers provide a number of services regardless of consumer 
want or need, and then limits the ability for insurers to 
charge more or less depending on the likelihood of an 
individual using that insurance. We can easily predict those 
individuals who will be the hardest hit by these coming premium 
increases: young and healthy adults and some other age groups 
as well.
    Furthermore, based on the materials provided by the 
insurers, the provisions in the Affordable Care Act that were 
supposed to mitigate the premium price increases are not going 
to be enough. For example, we have heard that those who can 
afford it the least will get subsidies if they earn less than 
400 percent of the Federal poverty line, which is nearly 
$46,000 for an individual. Yet one insurer told this committee 
that the subsidies would cover only 40 percent of the premiums. 
So after doubling your premiums, the Affordable Care Act pays 
for less than half of it.
    And what if you aren't eligible for a subsidy? If you are 
an individual making more than $46,000 or a family of four 
making more than $94,000, you won't be getting any help from 
the Federal Government. This health care plan was passed on the 
promise of lowering costs for everybody.
    Supporters of the law often point out that women can no 
longer be charged a different amount because of their gender, 
but this benefit actually stops as women get closer to 
retirement. Several insurers told the committee these women 
will actually face higher premium increases than older men 
because of the end of gender rating. So as women get older and 
will inherently need more health care coverage, this health 
care bill makes it even more expensive.
    We have also heard about the free services people get under 
the law, but these services are not free. Many insurers 
provided us with material showing that these free services were 
simply added to the premiums. So instead of paying for these 
services as they actually use them, everyone gets to pay for 
this in their premium regardless of whether you benefit from 
it.
    Now, our investigation has heard from the insurers, so 
today we hope to hear from those before us. We will hopefully 
be able to get the perspective of the actuaries before us as 
well as the industry representatives. Thank you again for 
joining us today.
    [The prepared statement of Mr. Murphy follows:]

                 Prepared statement of Hon. Tim Murphy

    I convene this hearing of the Subcommittee on Oversight and 
Investigations to examine the impact the Patient Protection and 
Affordable Care Act will have on the premiums of every America. 
Today we are joined by several witnesses: Cori Uccello is a 
Senior Health Fellow at the American Academy of Actuaries, 
Chris Carlson is an Actuarial Principal with the Oliver Wyman 
Group, Daniel Durham is the Executive Vice President for Policy 
and Regulatory Affairs with America's Health Insurance Plans, 
and Topher Spiro is the Vice President for Health Policy at the 
Center for American Progress.
    I thank the witnesses for joining us today.
    Today's hearing will focus on a question that many 
Americans are concerned about: will Obamacare increase the cost 
of my health insurance?
    Based on information provided by some of the nation's 
largest insurance companies and by outside analysts, the answer 
to that question is yes.
    Two months ago, the Subcommittee on Oversight and 
Investigations sent letters to 15 of the nation's largest 
insurers. We asked them for very basic information: what do you 
expect the Affordable Care Act will do the premiums of 
Americans? Will they in fact be more affordable? We didn't ask 
them to create new material and we didn't ask them to exclude 
or focus on certain information. Instead, we simply asked them 
for the materials they had already created to estimate the 
impact of the health care law on their consumers.
    Nearly all of the material the insurers submitted showed 
that Americans can expect massive premium increases. As one 
insurer told the committee, consumers in 90 percent of all 
states would likely face significant premium increases. Another 
wrote to the committee: ``The bottom line is that the PPACA 
does not contain many provisions that will reduce costs and 
improve affordability, especially in the short term.''
    To be fair, some individuals in a few states may see 
premium decreases. As identified by the insurers, these states 
are typically the ones that are already highly regulated: New 
York, Massachusetts, Maine, Vermont. But some of the materials 
submitted by the insurance industry show that even individuals 
in those states may still get a premium increase. And this 
still only represents five states. The other 45 can expect, as 
the insurers told us, significant premium increases. 45 states 
get premium increases, five may see a slight decrease. On the 
day this law was signed, the president said it would ``lower 
costs for families and businesses.'' It seems remarkable that a 
law that was passed on the basis of affordability will instead 
bring Boston prices to small town Pennsylvania, it would have 
been successful.
    Why are costs going to go up? According to the materials 
provided by the companies, the Affordable Care Act mandates 
insurers provide a number of services regardless of consumer 
want or need, and then limits the ability for insurers to 
charge more or less depending on the likelihood of an 
individual utilizing that insurance. We can easily predict 
those individuals who will be the hardest hit by these coming 
premium increases: young and healthy adults.
    Furthermore, based on the materials provided by the 
insurers, the provisions in the Affordable Care Act that were 
supposed to mitigate the premium price increases are not going 
to be enough. For example:
    We have heard that those who can afford it the least will 
get subsidies if they earn less than 400 percent of the federal 
poverty line, which is nearly $46,000 for an individual. Yet, 
one insurer told this committee that the subsidies would only 
cover 40 percent of the premium. So, after doubling your 
premiums, Obamacare pays for less than half of it.
    And what if you aren't eligible for a subsidy? If you're an 
individual making more than $46,000, or a family of four making 
more than $94,000-you won't be getting any help from the 
federal government. Obamacare was passed on the promise of 
lowering costs for everybody.
    Supporters of the law often point out that women can no 
longer be charged a different amount because of their gender-
but this ``benefit'' actually stops as women get closer to 
retirement. Several insurers told the committee these women 
will face higher premium increases than older men because of 
the end of gender rating-so as women get older and will 
inherently need more health care coverage, Obamacare makes it 
more expensive.
    We have also heard about the ``free'' services people get 
under the law- but these services are not free. Many insurers 
provided us with materials showing that these free services 
were simply added to premiums--so instead of paying for these 
services as they actually use them, everyone gets to pay for 
this in their premium, regardless of whether you benefit from 
it.
    Our investigation has heard from the insurers, so today we 
hope to hear from those before us. We will hopefully be able to 
get the perspective of the actuaries before us, as well as the 
industry representatives.
    Thanks again for joining us today.

                                #  #  #

    Mr. Murphy. I now recognize Ranking Member DeGette for her 
opening statement.

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

    Ms. DeGette. Thank you so much, Mr. Chairman. Mr. Chairman, 
last week for the 37th time the House voted to repeal the 
Affordable Care Act. And I suppose someone--I think you told me 
that we are all going to get little diamonds on our member pins 
when we hit 40 votes to repeal, but I am really mystified at 
the zeal to repeal the law, because I think we have made a lot 
of progress in the last 3 years, and as the law continues to be 
implemented, I think we will make a lot more progress.
    Some of the worst abuses of the insurance industry, like 
rescissions of coverage for those who became ill, and the 
refusal to provide care for children with pre-existing 
conditions are no longer allowed. Tens of millions of Americans 
are already receiving better health insurance coverage, 
benefiting from free preventative care, and the elimination of 
lifetime coverage limits. States are taking advantage of new 
rate review tools, helping to slow the outlandish rates at 
which insurance premiums were increasing before the Affordable 
Care Act. And I would point out those who are complaining that 
insurance rates are still rising in some areas need to look at 
how much they have been rising in the last 10 or 15 years in 
this country.
    Other things in the Affordable Care Act that are helping, 
over 3 million young adults under the age of 26 have been able 
to retain health insurance coverage on their parents' plan. 
Medicare coverage has gotten even better. Over 6 million 
seniors are benefiting from the Affordable Care Act closure of 
the part D doughnut hole. They have saved over $6 billion in 
prescription drug costs. Tens of millions of seniors have 
received free preventative care under the Affordable Care Act.
    And, Mr. Chairman, the early results seem to indicate that 
the Affordable Care Act's provisions design to reduce overall 
health care costs, which is what this hearing is about, are 
encouraging more coordinated care, moving away from payment 
systems that discourage unnecessary care, and paying more for 
quality than for quantity are working.
    The National Health Expenditure Survey released in January 
found that health expenditures are increasing at their slowest 
rate in 50 years. The Congressional Budget Office reported what 
one analyst called ``a sharp and surprisingly persistent 
downward slow''--let me try that again--``a sharp and 
surprisingly persistent slowdown in health care costs'' since 
passage of the Affordable Care Act.
    And last week, largely because of these changes, CBO 
reported a drop in deficit productions of hundreds of billions 
of dollars. And I think, Mr. Chairman, that these success 
stories are only the beginning.
    In January 2014, the ACA will be fully in effect. When that 
happens, all Americans will, for the first time, have access to 
affordable health coverage regardless of age, gender or whether 
they have a pre-existing health condition. Millions of low 
income Americans will be able to sign up for Medicaid. Others, 
who do not receive coverage from their employer, will be able 
to shop for insurance on the competitive and transparent 
environment of health care exchanges, and most will qualify for 
tax credits to help pay for this coverage. According to the 
CBO, 86 percent of individuals who receive coverage through the 
ACA exchanges will receive tax credits, with the average credit 
reducing costs by over $5,000 a year.
    So, Mr. Chairman, I think the ACA represents a real and 
enduring improvement in quality of life. We have a lot of work 
to do, and that's why I am really glad that we are having this 
second hearing on implementation of the ACA. And I would urge 
the entire Energy and Commerce Committee to spend less time 
fighting about whether we should have this important 
legislation and more time talking about how we can make it work 
better.
    We have heard people complaining that there are going to be 
massive premium increases, but the Affordable Care Act's tools 
to help cut costs, from rate review, to tax credits, to the 
availability of lower cost catastrophic plans for young people 
will ensure that health insurance is affordable.
    Now, later this week, we are going to learn about the ACA 
premiums in my State in Colorado, but we already had more 
insurers than we expected, 19 of them, line up for enrollment 
in the exchange, so we think this should only benefit 
competition in Colorado. In States like Rhode Island, 
Washington State, and Vermont, they show no evidence that the 
worst-case scenario of rate increases, the rate shock that we 
hear so much about, will happen.
    And so I hope that we can really take it--take time in this 
hearing and as we go forward in this subcommittee, look at the 
good things the law is doing for the American people and 
figuring out how we can make health care even more available 
for all Americans and more cost-effective.
    With that, Mr. Chairman, I yield back.
    Mr. Murphy. Thank the gentlelady.
    Now turn to Dr. Burgess for his opening statement, 5 
minutes.

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

    Mr. Burgess. Well, thank you, Mr. Chairman. And I 
appreciate the fact that we are having this hearing today. It's 
important, and I think we need to have this discussion.
    You know, the summer of 2009 is a time that I will never 
forget. The town halls that summer, my little town of Denton, 
Texas, which normally if I could get 2 dozen people to show up, 
I thought I was doing a good job, we had 2,000 people show up 
for the town hall. And why? Because they were concerned about 
what they saw just over the horizon with the President's effort 
to take over the administration of health care in the entire 
country.
    They weren't asking us to do that. They were saying, be 
careful. Do not disrupt the system that is arguably working 
well for 60 to 65 percent of the people in this country, but if 
you are going to do anything at all, could you please help us 
with costs?
    Now, I think January 1st of 2014, we will begin to see how 
disruptive this law has been to the system in the country. We 
will--we will have to wait on that day and see if I am right on 
that premise, but we do know today about the effects on cost, 
and they have not been good.
    The President, in the heady days leading up to the passage 
and the signing of the Affordable Care Act, said 2,500 bucks is 
what you are going to save once this law comes into effect and 
online. Today, nobody's talking about saving $2,500. In fact, 
most people are worried that they are going to spend that 
amount more. Now, it's all well and good to say that, hey, that 
costs would have gone up even more without the Affordable Care 
Act, but that's a pretty difficult premise to prove, but what 
people are--do know, that they see when they open their cost of 
their insurance for the coming year is that it's going up 
significantly.
    I had a youngster in my district over the weekend, mid 30s, 
single, he teaches school, his premiums have doubled this year. 
And, like many young men, he is questioning whether or not he 
even should continue the insurance, because after all, there is 
no real penalty, and if he gets sick, don't they have to take 
care of him anyway? That is a problem that is on the horizon 
that really has been poorly addressed, but this committee, in 
doing its work, sent out a number of letters to 17 of the 
Nation's largest health insurance companies requesting analysis 
of the effect of the Affordable Care Act's policies, the 
mandates, the taxes and fees on health insurance premiums.
    The results demonstrate exactly what some of us have felt 
all along, that the Affordable Care Act fails to lower costs, 
and instead exacerbates the very problems it was sent to 
correct.
    The greatest effects of the increase in costs from the 
Affordable Care Act will be felt by the very individuals that 
the President claimed it would help the most, that is, people 
in the small group market, people in the individual market, and 
people who lack health insurance.
    Insurers in our survey reported that not only would 
premiums increase across almost all 50 States, but they also 
reported that these premiums will increase between 1 and 400 
percent. Even more troubling is that the premium increases are 
not just contained to the individual market, but will also be 
felt by consumers in the small group market and the large group 
market. Small businesses purchasing these plans can expect 
premiums to go up by 50 percent on average.
    Many employers in the large group markets choose to self-
insure, and even these plans reported that the taxes and fees 
embedded in the Affordable Care Act could increase premiums 
from 15 to 20 percent on average.
    Now, there has always been this notion that we will tax an 
insurance policy and that money will somehow come out of the 
salaries of the executives in the insurance company. Well, I 
tell you, that's a fantasy. Those charges do not come out the 
salaries of the executives. They are passed on to the rate 
payer, they are passed on to the premium payer of those 
insurance policies, and that effect is going to be felt in a 
very profound way beginning next year.
    The central promise of the Affordable Care Act is the 
component of the law that was supposed to hold costs down is in 
fact going to be very detrimental to consumers, to job 
creators, and to health care providers.
    One of the most offensive things that I hear people--when I 
hear people talk about the Affordable Care Act is things are 
going to be free. Let me just tell you, practicing medicine for 
25 years, there is nothing free that happens in a doctor's 
office or a hospital. You are either stealing something, even 
if it's just the intellectual property of the doctor or nurse 
who provides that care, it's paid for somewhere by someone. 
Unfortunately, those people aren't represented today.
    I will yield back the balance of the time.
    Mr. Murphy. The gentleman yields back. I now recognize the 
ranking member of the full committee, Mr. Waxman, 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. Our hearing today is 
supposed to discuss insurance coverage and insurance premiums 
under the Affordable Care Act. This is a--not a new topic. When 
the Democrats, and I chaired this committee, adopted this 
legislation, we looked at that issue very, very carefully. We 
did numerous investigations of the health insurance market, and 
we found that premiums were rising very fast and in an 
incomprehensible way. Millions of Americans who had pre-
existing conditions either couldn't get insurance at all or 
they were charged a very high extraordinary price for insurance 
coverage. And we also found out that even conditions where a 
woman might get pregnant or was the victim of domestic abuse 
wouldn't qualify for insurance or would have to pay more for 
her insurance.
    Americans were paying for inadequate insurance. People were 
buying insurance that didn't really cover their health care 
needs, but it wasn't very expensive, so they thought they were 
covered. We learned Americans were paying very high amounts for 
deductibles and they had stringent annual and lifetime limits 
on the coverage. People didn't realize this, but a lot of the 
policies the insurance companies were selling were very, very 
limited.
    So what we learned was that the market was broken. A lot of 
people who needed insurance badly couldn't afford it or 
couldn't even get it. If people had insurance, they lived with 
a great deal of insecurity about whether they would be able to 
continue to afford it.
    And the Act, the Affordable Care Act, requires insurers to 
provide quality, secure coverage that is there for people when 
they need it. That's why the law contains numerous tools to 
make coverage affordable. So I was surprised last week when the 
Republicans on this committee ignored these provisions when 
they released an analysis warning of high premiums under the 
Affordable Care Act. This is what they are warning about. I 
think this is what they are hoping for, but they are going to 
be wrong.
    The Republicans' report presented large premium increases 
as a certainty, but it only reached this faulty conclusion by 
cherry-picking data, ignoring the cost saving programs in the 
Affordable Care Act, ignoring the value of improved coverage 
available under the law.
    The report, Mr. Chairman, ignored the fact that under 
Obamacare, the 85 percent of Americans with employer or public 
coverage will see little change in premiums or coverage because 
of this law. They will be able to keep that coverage. The 
report also ignored the impact of the Affordable Care Act's tax 
credits to help cover the cost of insurance premiums. And 
according to the CBO, 86 percent of the people that go to the 
marketplace for these individual policies will be getting tax 
credits, reducing the cost by an average of $5,000 per year. 
These tax credits will help make insurance coverage affordable 
for millions.
    The report, of course, ignored the impact of the small 
business tax credits that can cut the cost of insurance by 50 
percent. It ignored the impact of competition, because when you 
go into that marketplace, you will have a number of insurance 
policies competing for your business. When there is 
competition, it will lower the cost, and CBO says in this case, 
by as much as 10 percent.
    The Republican report ignored the fact that because of this 
Act, many women, older Americans and those with pre-existing 
conditions are likely to see their premium costs fall, because 
if they have insurance coverage and they are paying for it, 
they are paying a lot more for that coverage and they are no 
longer going to be required to pay more for that coverage in 
the future, starting in January.
    The report the Republicans put out ignored the fact that 
many Americans pay higher premiums, but they will also be 
paying higher premiums because they are going to actually get 
better coverage.
    In recent weeks, we have received some actual premium data 
that we can use to protest the Republicans' prediction of doom, 
and today my staff released an analysis of the States where 
insurers have submitted their premiums for 2014, five States, 
Vermont, Oregon, Washington, Rhode Island and Maryland, and 
there is little evidence in those States of a rate shock that 
Republicans have been predicting. In many cases, Americans will 
actually pay less for comparable coverage.
    I would like to ask that this staff memo and a memo 
released last week be made part of the record, Mr. Chairman.
    Mr. Murphy. Without objection.
    [The information appears at the conclusion of the hearing.]
    Mr. Waxman. This is going to be the true story of premiums 
under the ACA: Better coverage, affordable rates, and 
protection from insurance company abuse. We need to begin to 
focus on the facts so we can stop misleading the American 
people. Thank you, Mr. Chairman.
    Mr. Murphy. The gentleman's time has expired and now we 
will be continuing on with our other comments here. Now, we are 
going to talk about our witnesses here. Let me introduce each 
one. Our first witness is Ms. Cori Uccello. Got it right this 
time. She is a senior health fellow at the American Academy of 
Actuaries. She is the actuarial profession's chief policy 
liaison on health care issues. Ms. Uccello has prepared 
testimony and has authored, co-authored and contributed to 
several academy publications on various health-related issues. 
She was appointed to the Medicare Payment Advisory Commission, 
otherwise known as MedPAC, in May of 2010.
    Our second witness is Chris Carlson. He is an actuary in 
the health care field working at Oliver Wyman. He provides 
consulting services to help insurers, health providers 
employers and State regulators. Previously, Chris worked in the 
industry as a pricing actuary at a Blue Cross/Blue Shield. 
Lately, Mr. Carlson has been assisting health care plans in 
developing premium rates in preparation of the market changes 
in 2014. He has written several reports that quantify the 
impact of the health insurance fees that have been widely 
accepted by the actuarial profession, and recently published an 
article describing the effect of age ratings compression in the 
American Academy of Actuaries magazine.
    Our third witness, again, is Daniel Durham. He is currently 
the executive vice president for Policy and Regulatory Affairs 
for America's Health Insurance Plans, where he leads health 
care reform implementation efforts and policy activities. He 
has served in high level policy positions in the private sector 
as well as in the Federal Government at the U.S. Department of 
Health and Human Services, the Social Security Administration 
and the Office of Management and Budget.
    And our final witness is Topher Spiro. He is the vice 
president for Health Policy at American Progress. Prior to 
joining American Progress, Spiro worked on health care reform 
at both the Federal and State levels. He served as deputy staff 
director for health policy for the U.S. Senate Committee on 
Health, Education, Labor and Pensions under Senator Edward M. 
Kennedy and Senator Tom Harkin.
    I will now swear in the witnesses.
    You are aware that the committee is holding an 
investigative hearing, and when doing so has a practice of 
taking testimony under oath. Do any of you have any objections 
to giving testimony under oath? All the witnesses responded no.
    So the chair then advises you that under the rules of the 
House and the rules of the committee, you are entitled to be 
advised by counsel. Do you desire to be advised by counsel 
during your testimony today? And all the witnesses have said 
no.
    In that case, if you would please rise and raise your right 
hand, I will swear you in.
    [Witnesses sworn.]
    Mr. Murphy. You are now under oath and subject to the 
penalties set forth in Title 18, Section 1001 of the United 
States Code. Each of you may now give a 5-minute opening 
statement.
    Ms. Uccello, you are first.

 STATEMENTS OF CORI E. UCCELLO, SENIOR HEALTH FELLOW, AMERICAN 
   ACADEMY OF ACTUARIES; CHRIS CARLSON, ACTUARIAL PRINCIPAL, 
OLIVER WYMAN GROUP; DANIEL T. DURHAM, EXECUTIVE VICE PRESIDENT, 
POLICY AND REGULATORY AFFAIRS, AMERICAS HEALTH INSURANCE PLANS; 
  AND TOPHER SPIRO, VICE PRESIDENT, HEALTH POLICY, CENTER FOR 
                       AMERICAN PROGRESS

                  STATEMENT OF CORI E. UCCELLO

    Ms. Uccello. Good afternoon, Chairman Murphy, Ranking 
Member DeGette and members of the subcommittee. I am Cori 
Uccello, senior health fellow at the American Academy of 
Actuaries, which is the nonpartisan association for actuaries 
in the U.S. We provide objective information as policymakers 
and regulators work to formulate public policy. Thank you for 
inviting me to speak today.
    New health insurance rules that apply to the individual and 
small group markets will go into effect in 2014. The new rules 
will affect average premiums, but premium changes will differ 
across States and individuals. The academy has not done a 
projection of premiums in 2014, either on a national basis or 
for any subgroups of the population; rather, my goal today is 
to provide a framework for understanding premium changes by 
discussing the factors that will affect premiums. I will focus 
most of my remarks on changes in the individual market.
    First I will discuss the factors that affect average 
premiums. As a reminder, premiums are set to cover the medical 
claims and administrative costs of the pool of individuals with 
insurance. In other words, premiums reflect the underlying 
demographics and health status of the insured population. The 
underlying composition of the insured population could change 
in 2014, due to several factors. One is the guaranteed issue 
provision that will prohibit insurers from denying coverage 
based on pre-existing conditions. Increasing the ability of 
high cost people to purchase coverage could put upward pressure 
on premiums. The individual mandate and premium subsidies will 
mitigate this effect by providing incentives for younger and 
healthier people to obtain coverage.
    It's also important to consider whether individuals will 
shift between different types of coverage. If employers drop 
coverage and workers shift to the individual market, the impact 
on individual market premiums will depend on the demographics 
and health status of those shifting.
    Individuals moving out of high risk pools and into the 
individual market will put upward pressure on premiums. 
Offsetting this effect in the near term will be the temporary 
re-insurance program.
    Premiums also reflect a plan's benefit design, with more 
generous plans coming with higher premiums. New essential 
health benefit and actuarial value requirements could mean that 
plans will be more generous. While this could put upward 
pressure on premiums, it will also lower out-of-pocket cost 
sharing.
    Premium changes will vary across individuals based on age, 
gender and health status. In most States, the compression of 
premiums due to the new age rating restrictions will increase 
the relative premiums for younger adults and reduce them for 
older adults. Prohibiting different premiums by gender will 
shift costs between men and women depending on age, and 
prohibiting health status rating will increase the relative 
premiums for healthy individuals and reduce them for those in 
poor health.
    Although young adults not eligible for premium subsidies 
may be most at risk for premium increases, they will have 
access to catastrophic plans. The premiums for these plans can 
be set lower to reflect a younger enrollee population.
    Premium changes will also vary by State. In States that 
already limit the extent to which premiums can vary across 
individuals, especially among those with guaranteed issue 
requirements, average premiums could decline as lower-cost 
individuals obtain coverage due to the individual mandate and 
the premium subsidies. In States with no or few rate 
restrictions, premiums are more likely to go up to reflect an 
influx of higher-cost individuals.
    My remarks have focused primarily on the individual market. 
There will be premium changes in the small group market as 
well, but likely to a lesser extent. Insurers are already 
prohibited from denying coverage to small groups and small 
group plans are already more likely to meet most of the plan 
generosity requirements.
    Most States, however, currently allow insurers to vary 
premiums across groups. The new rate restrictions will cause 
different premium changes across--across groups. In general, 
the groups with the greatest increases will be the low cost 
groups, while those with the greatest decreases will be the 
high cost groups. And premium changes across groups will vary 
by State.
    In closing, I want to, again, highlight that when examining 
how premiums will change beginning in 2014, it's important to 
understand the various factors underlying these changes. These 
include the effectiveness of the individual mandate and premium 
subsidies, the new benefit requirements, employer decisions to 
offer coverage, each State's current market rules, and each 
individual's characteristics.
    Thank you, and I look forward to your questions.
    Mr. Murphy. Thank you.
    [The prepared statement of Ms. Uccello follows:]

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    Mr. Murphy. Mr. Carlson, you are recognized for 5 minutes.


                   STATEMENT OF CHRIS CARLSON

    Mr. Carlson. Thank you. Mr. Chairman and members of the 
subcommittee, thank you for this opportunity to testify on 
premium rates under the ACA. My testimony will focus on factors 
that are affecting premium rates that have been filed for 2014, 
and have been made available for public review. I will also 
discuss the professional responsibility of actuaries that are 
involved in preparing and certifying these rates.
    There are three specific actuarial factors of the rate 
filings that I would like to address, which are, the impact of 
changes in the population on morbidity, changes in the value of 
benefits, and the impact of the transitional re-insurance 
program.
    Recall that the CBO estimated the change in premium rates 
in their November 2009 letter to Senator Evan Bayh. Overall, 
the CBO expected premium rates to increase between 10 and 13 
percent. Now that filings are available, we can discuss what is 
actually happening to premium rates.
    I reviewed the 2014 rate filings in three States: Oregon, 
Maryland and Vermont. In each State, I identified the top 
health insurers and pulled from their filings the factors 
described above.
    First, in Oregon, we reviewed the filings for the top three 
health insurers. We found that the expected change in morbidity 
due to new enrollees in the non-group market is between 27 
percent and 46 percent. Although we note that the Oregon market 
also includes a merger with the high risk pool, which 
constitutes a very costly population. We also found the change 
in premiums due to average value of benefits ranged from an 
increase of 2 percent to a decrease of 17 percent.
    Finally, the re-insurance program is expected to decrease 
rates by 10 to 12 percent. Overall, the average premium rate in 
these filings represents an increase of 36 to 53 percent over 
current premium rates.
    The publication of these rates and the transparency of the 
process have had an immediate effect. One carrier has already 
expressed interest in revision to their rate filings due to 
concern about their rates relative to their competition and has 
produced reducing their rates by 15 percent.
    The second State we reviewed is Maryland. We looked at the 
rate filings for two companies in the State and found the 
results to be quite divergent. One company has proposed rates 
that include 25 percent increase for morbidity for new 
enrollees, a 2 percent increase for benefits and a 4 percent 
reduction for re-insurance. Overall, they proposed a rate 
increase of 25 percent relative to current rates. The second 
company proposed an increase of 65 percent due to morbidity, a 
6 percent increase for benefits and an 8 percent decrease for 
re-insurance. Overall, they proposed rates that are 120 percent 
higher than the current rates.
    The final State we reviewed is Vermont, where there are 
only two health insurers that filed rates. Overall, the rates 
are expected to be consistent with the current premium rates in 
the market; however, it is worth noting that Vermont is already 
a community-rated State with guarantee issue, thus we would not 
have expected an increase, and in fact, some may have expected 
lower premiums in the State.
    The factors I discuss in each of these filings do not 
include the impact of age rating, therefore, for younger 
individuals that are affected by the age rating compression, 
the increases would be higher.
    It is important to understand that these rates are before 
any consideration of the premium subsidies available in the 
exchanges. For the individuals that are expected to be eligible 
to receive premium subsidies, the amount they pay will be less, 
and sometimes substantially less.
    Finally, I would like to add a few comments about the 
actuaries that have developed the rates described herein. The 
actuarial profession has a strong reputation of professionalism 
and independence. While many actuaries work and consult with 
insurance companies, we also work with regulators and consumer 
advocacy groups, and our high standards of professionalism 
always come first. This is illustrated in our code of 
professional conduct which, among other things, requires 
actuaries to act honestly, with integrity and competence, not 
be influenced by conflicts of interest, and only perform work 
where we are properly qualified.
    The rates that actuaries are proposing require 
certification, which has components that are relevant in this 
discussion. The rates must be reasonable in relation to the 
benefits to be provided and must be neither excessive nor 
unfairly discriminatory. These provisions, in addition to 
minimum loss ratio requirements, protect consumers to ensure 
that they are receiving fair value and benefits for the 
premiums they pay.
    The purpose in mentioning these issues is to help the 
public understand that the rate proposals that have been 
prepared in support of premium rates beginning in 2014 are done 
with the utmost of care. As actuaries, we do not take lightly 
the responsibility that has given us, and strive to maintain a 
high level of integrity and professionalism.
    Mr. Chairman, again, I thank you for the opportunity to 
speak and look forward to answering any questions.
    Mr. Murphy. Thank you.
    [The prepared statement of Mr. Carlson follows:]

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    Mr. Murphy. Now to Mr. Durham. You are recognized for 5 
minutes.


                 STATEMENT OF DANIEL T. DURHAM

    Mr. Durham. Good afternoon, Chairman Murphy, Ranking Member 
DeGette and members of this committee. I am Dan Durham, 
executive vice president for Policy and Regulatory Affairs at 
AHIP. I appreciate this opportunity to testify regarding the 
Affordable Care Act's impact on health insurance premiums.
    Our members are focused on implementing all the new changes 
required by the ACA in 2014 in a manner that will be least 
disruptive and least costly to consumers and employers, and we 
have been working closely with Federal regulators and State 
regulators to identify challenges and offer constructive 
solutions. Health plans are committed to ensuring 
implementation as smooth and possible, and are doing their part 
to be ready to go when open enrollment begins.
    Our written testimony focuses on factors that are driving 
health insurance premiums, including specific provisions in the 
ACA, and strategies that we support for bringing down health 
care costs. A broad range of studies, including several 
commissioned by AHIP, provide insights into the likely impact 
the ACA will have on premiums beginning in 2014.
    An April of 2013 report by Milliman provides a 
comprehensive overview of ACA provisions that will impact 
individual market premiums next year. This report explains that 
covering pre-existing conditions, requiring a broader benefit 
package, and covering more uninsured Americans who have gone 
without medical costs, will benefit millions of people while 
increasing the cost of coverage. It further emphasizes that the 
new health insurance tax and other fees will also increase 
premiums.
    At the same time, Milliman indicates that other ACA 
provisions will make coverage more affordable, including 
premium and cost-sharing subsidies and the transitional re-
insurance program, which will help offset the impact of high 
cost enrollees in the individual market.
    Premiums for specific individuals will vary significantly 
depending on their age, gender, location, health status, income 
level, and what coverage they have today.
    Additional studies estimate the impact on several specific 
ACA provisions. The new health insurance tax, the age rating 
restrictions, and the minimum benefit requirements that will 
directly impact premiums.
    The ACA insurance tax begins in 2014 and will exceed $100 
billion over 10 years. While the tax is assessed on health 
plans, it will increase costs for individuals and small 
businesses, Medicare Advantage beneficiaries, and State 
Medicaid programs. CBO has stated that this tax will largely be 
passed through to consumers in the form of higher premiums. An 
Oliver Wyman analysis estimates that the tax will increase the 
cost of family coverage in the individual market by $270 in 
2014, and by an average of $5,080 over 10 years.
    We strongly support bipartisan legislation to repeal this 
tax introduced by Congressmen Boustany and Matheson.
    Regarding the age band compression, beginning in 2014, the 
ACA will allow health insurance rates to vary based on an 
enrollee's age by a ratio of no more than three-to-one. This is 
a dramatic change from the age bands of five-to-one or more 
currently effective in 42 States. We are deeply concerned that 
the ACA's restrictive age band will cause premiums to increase 
dramatically for younger people.
    An Oliver Wyman study concludes that young single adults 
age 21 to 29 with incomes beginning at about 225 percent of the 
Federal poverty level can expect to see higher premiums than 
would be the case absent the ACA, even after accounting for the 
presence of premium assistance. We thank Congressmen Gingrey 
and Matheson for introducing bipartisan legislation to address 
this concern.
    Beginning in 2014, the ACA will require health plans to 
offer essential health benefits package covering a broad range 
of mandated benefits, some of which typically are not included 
in current individual and small group policies. This will 
require consumers to buy up coverage beyond what they have 
today. A variety of studies commissioned by State departments 
of insurance and State exchange boards have found that the EHB 
requirements will result in higher premiums.
    In conclusion, additional challenges are raised by the 
underlying cost of medical care. Recognizing the need to reduce 
costs, our members have been very proactive in advocating 
solutions to this problem. AHIP's board of directors recently 
approved a series of strategies to bring down costs and to make 
coverage more affordable by tackling barriers to transparency, 
facilitating benefit modernization, and advancing bold 
structural reforms.
    Thank you again for this opportunity to testify.
    Mr. Murphy. Thank you, Mr. Durham.
    [The prepared statement of Mr. Durham follows:]

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    Mr. Murphy. Mr. Spiro, you are recognized for 5 minutes for 
your opening statement.


                   STATEMENT OF TOPHER SPIRO

    Mr. Spiro. Mr. Chairman, Ranking Member DeGette, thank you 
for the opportunity to testify today about the premium impact 
of the Affordable Care Act.
    When thinking about this issue, it is important to be clear 
about who will be affected by reforms and how. Nearly 90 
percent of insured Americans are covered by employer plans, 
Medicare, Medicaid or other government programs. These 
Americans will not be affected by reforms to non-employer 
coverage under the ACA.
    Now consider the remaining 10 percent of the population. 
Concern is focused on the premium impact for young adults with 
higher incomes who will not be eligible for full subsidies, but 
the fraction of the population that now has non-employer 
coverage is between the ages of 19 and 29 and has income above 
250 percent of the Federal poverty level is 0.5 percent.
    By contrast, the Affordable Care Act will benefit tens of 
millions of Americans, who have been offered Swiss cheese 
insurance, who were priced out of the market or who were denied 
insurance all together. All Americans will benefit from the 
security and peace of mind of knowing that if misfortune 
strikes, they will not suffer financial catastrophe.
    Studies on this topic always omit key factors that greatly 
influence the costs people would pay out of pocket. While some 
of the studies take into account some of the factors, none of 
them take into account all, or even most of the following 
factors.
    First, of course, most important, premium tax credits. 
According to the Urban Institute, 70 percent of young adults 
who now have non-employer coverage will be eligible for 
Medicaid or exchange subsidies; the availability of parents' 
coverage for young adults up to age 26; the availability of 
catastrophic plans for young adults up to age 30; insurance for 
insurers that incur high costs, known as re-insurance. For 
example, in California, re-insurance is projected to lower 
premiums by 9 percent. Administrative savings. For example, in 
California, administrative savings are projected to lower 
premiums by 4.5 percent. Finally, the medical cost trend that 
would occur anyway in the absence of the Affordable Care Act. 
For example, in California, the projected premium increase in 
the absence of the ACA is 9 percent.
    Because these studies are not reliable, it is instructive 
to compare some of them with actual rate filings and analyses 
by independent experts. A recent report by the Lewin Group and 
Optum projects that the pool of insured people will become less 
healthy overall, increasing average costs by 32 percent, but 
the independent Congressional Budget Office came to a different 
conclusion on this point, finding that the influx of new 
enrollees will actually lower premiums by 7 to 10 percent on 
average. This huge discrepancy seems to be driven by the Lewin 
report's assumption that there will be an influx of unhealthy 
people from large employers.
    To illustrate how the Lewin report is speculative and 
incomplete, consider actual rate filings in Washington. The 
Lewin report projected an average cost increase of 14 percent, 
but we now know that many Washingtonians will actually see 
lower premium rates. The average proposed premium increase is 7 
percent, less than the projected medical cost trend that would 
occur anyway in many States.
    The experience in Washington is noteworthy, because just 
last year the executive vice-president of the Blue Cross 
insurer warned that premiums would increase by 50 to 70 
percent. In other words, the hysteria did not match up with the 
reality.
    One recent development that is encouraging is that 
competition is already lowering premiums, because consumers can 
more easily shop for and compare plans. In Oregon, when premium 
proposals were posted publicly online, two insurers immediately 
lowered their proposed rates by 15 percent and more to remain 
competitive. Clearly these insurers had been inflating their 
projected costs. One insurer said its actuarial projections had 
been too pessimistic.
    Finally, it is important not to lose sight of the benefits 
of insurance market protections and improved coverage. 
Exchanges will offer brand-new, modernized products. Comparing 
their prices to the prices of old, Swiss cheese insurance 
products is like comparing the price of an iPhone to the price 
of a Sony Walkman. It is not a meaningful comparison.
    Nor should we focus exclusively on premiums, which are not 
consumers' only costs. While providing more coverage increases 
premiums, it lowers out-of-pocket costs. A narrow focus on 
premiums also ignores the millions of Americans who have been 
shut out of a dysfunctional market.
    Furthermore, premiums reflect a snapshot in time. Just 
because you are young and healthy now does not mean you will 
always be.
    In the current dysfunctional market, premiums can spike for 
both individuals and small businesses----
    Mr. Murphy. The gentleman's time has expired. Can you just 
summarize the rest of your----
    Mr. Spiro. I am almost done.
    Mr. Murphy. OK.
    Mr. Spiro [continuing]. As a result of many factors that 
are totally beyond their control. In the modernized market when 
people get sick or are diagnosed with a medical condition or 
just grow older, they will not experience rate shock.
    Mr. Chairman, this concludes my testimony. I am happy to 
answer questions.
    [The prepared statement of Mr. Spiro follows:]

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    Mr. Murphy. I appreciate all of--the testimony from all of 
the witnesses today. We will go on to some questions here, and 
I will start off with 5 minutes for myself here. Although I am 
reminded sometimes, like when we have economists in front of 
us, they all talk about you don't see a one-handed economist 
because they always say, ``On the other hand.'' So this will be 
important to get some information from you all.
    Mr. Carlson, today Mr. Waxman released a staff memo we had 
put in the record saying that the customers in Rhode Island, 
Vermont, Maryland, Oregon and Washington can expect large rate 
decreases. In your testimony, however, you note that you 
reviewed the actual rate filings in some of these States, 
Oregon, Maryland and Vermont. Am I correct?
    Mr. Carlson. Yes, that's correct.
    Mr. Murphy. And your testimony States an average premium 
rate in these files represents an increase of 36 to 53 percent 
over current premium rates. Can you elaborate on this?
    Mr. Carlson. Well, that information was from the--several--
I believe that was the Oregon rate filings that I was 
mentioning there. And based on all the factors that they have 
in their filing, including trend rates, all of the assumptions 
due to the changes in the market, market rules, all those 
factors combined resulted in rates for a similar benefit 
package of 36 to 53 percent increases. So having not----
    Mr. Murphy. That's for Oregon? That's for Oregon, you are 
saying?
    Mr. Carlson. I believe that was Oregon, yes.
    Mr. Murphy. OK.
    Mr. Carlson. Having not seen the report that was put out 
today, I can't comment how those numbers relate.
    Mr. Murphy. I see. But I just want to make sure I 
understand. In Oregon, you said there's probably going to be a 
premium increase?
    Mr. Carlson. Yes. That's correct.
    Mr. Murphy. Right. Now, in Maryland you note that one 
insurance proposed an overall rate increase of 25 percent. Am I 
correct?
    Mr. Carlson. That's correct, yes.
    Mr. Murphy. And another insurance proposed rates that are 
120 percent higher than the current rates in the market?
    Mr. Carlson. Yes.
    Mr. Murphy. Correct, too? Can you elaborate on these 
findings? Basically you said Maryland's going to see a premium 
increase, but can you elaborate on----
    Mr. Carlson. Well, I think the important point to take from 
there is that the rate increases are going to differ 
substantially based on what State you are in, what kind of 
market you are in, the level of benefits that you currently 
have, and, you know, other factors as far as, you know, the 
insurer that is showing a very high rate increase, they may 
have been able to enroll a much healthier population in the 
past, therefore, when they get a normal mix of membership, they 
end up with a much higher rate increase than if they had 
started with an average population.
    So, no individual is going to get the same rate increase. 
It's going to differ greatly from one individual to the next.
    Mr. Murphy. I see. All right. Mr. Durham, last week the 
committee released its findings on the investigation we 
conducted in the internal analysis of how premiums will be 
impacted by the Affordable Care Act, and after reviewing the 
internal analysis of the nation's largest insurers, we saw that 
massive premium increases are likely. Can you provide your view 
on the likelihood of this?
    Mr. Durham. Well, I read the report from the committee and 
looked at the great degree of variability in premiums depending 
on the individual's age, their location, their health status, 
and it's similar to what we find in our Milliman report that I 
described in my testimony. Again, a great degree of variability 
here in terms of how plans are building their premiums in 2014. 
There are certain things that are sure to include increases in 
premium costs, and those include the health insurance premium 
tax, other fees and assessments, the benefit buy-up, since 
many, particularly in the individual market, have coverage that 
is less generous than coverage that's required under the ACA, 
and also the age band compression, where younger individuals 
are likely to face much higher----
    Mr. Murphy. So it's safe to say in States that already have 
a number of these restrictions, they--they will not see a lot 
of movement, in the States that do not have those, they will 
see a lot of upward movement----
    Mr. Durham. That's correct.
    Mr. Murphy [continuing]. In general? Thank you.
    Mr. Durham. And on the other side of the coin, the Milliman 
report also goes into detail about the premium tax subsidies 
that will help lower income individuals, which--which are very 
important, and also other things that will lower premium costs, 
such as competition in the marketplace that was mentioned 
earlier.
    Mr. Murphy. Sure. Competition helped lower things in the 
Medicare Part D plan, which is often bashed, which--by 41 
percent below, I think it is.
    But let me ask this real quickly, Ms. Uccello and Mr. 
Durham, because you both stated in your testimony--you talked 
about the individual mandate effect on this, Ms. Uccello, and 
Mr. Durham, you made a reference to people between 21 and 29.
    Are a lot of these estimates based upon the assumption that 
all those people will sign up or do they also take into account 
if people see rates go very high for themselves, regardless of 
subsidies, they may not show up, may not sign up, and then that 
will affect rates as well?
    Ms. Uccello, can you comment on that?
    Ms. Uccello. I can't comment directly on the different 
projections, but I assume that each of those projections makes 
assumptions regarding participation in the market. And as you 
were alluding to, key to the viability of this program is 
attracting the lower cost people into the pool to help offset 
the higher costs of the--of those other people.
    Mr. Murphy. Thank you. I am out of time, but if I could 
ask, Ms. Uccello, if you could provide a little more 
information to this committee on what means, and Mr. Durham, 
elaborate on those two points, that's very important to us, in 
terms of the assumptions with regard to people signing up by 
the mandate.
    I now recognize--I am out of time--Ms. DeGette for 5 
minutes.
    Ms. DeGette. Thank you very much, Mr. Chairman.
    Ms. Uccello, just like Mr. Carlson, you are also an 
actuary. Is that correct?
    Ms. Uccello. That is correct.
    Ms. DeGette. And you--you testify--it sounds to me like the 
gist of your testimony is we are going to have sort of a 
rebalancing of rates, because in the exchanges at least and in 
these plans, we are going to be covering everybody. Is that 
right?
    Ms. Uccello. Yes.
    Ms. DeGette. So right now what happens is if an individual 
with a pre-existing condition, or a woman, or somebody who's 
older, people like that, if they choose to get insurance, their 
insurance will be more expensive, because the pool is smaller. 
Is that right? So cheaper people aren't in those pools right 
now. I think you said that, too, Mr. Durham, as a matter of 
fact.
    Mr. Durham. I think the concern is----
    Ms. DeGette. For some people, for some people, insurance is 
much more expensive now because health care costs more for 
them, right?
    Ms. Uccello. There are some people--depending on what State 
and the rules that apply in that State, some people with pre-
existing conditions may not have access to coverage at all----
    Ms. DeGette. Right. But what I am saying is----
    Ms. Uccello [continuing]. They may be paying more.
    Ms. DeGette. What I am saying is so when you put everybody 
into the pool, some people will pay higher insurance rates, 
some people--like young people.
    Ms. Uccello. Yes.
    Ms. DeGette [continuing]. And some people will pay lower 
insurance rates. Is that right?
    Ms. Uccello. Yes.
    Ms. DeGette. And that's because the pool is bigger, right?
    Ms. Uccello. It's more about the distribution of who's in 
the----
    Ms. DeGette. OK. Right. And so there are going to be a lot 
of people who are paying lower insurance rates under the 
Affordable Care Act, correct?
    Ms. Uccello. Depending on the certain--the particular 
circumstance, premiums go down for some people----
    Ms. DeGette. For some people.
    Ms. Uccello [continuing]. And for others go up.
    Ms. DeGette. And in addition, other people, in fact, the 
majority of people who will now be going into these exchanges 
will be subsidized, will be eligible for the tax credits, 
correct?
    Ms. Uccello. I don't know the specific share, but the 
people who are eligible will indeed see downward pressure on 
their net premium.
    Ms. DeGette. Spoken like a true actuary.
    Mr. Durham, I wanted to ask you, because I think you would 
agree, since you have been looking at these issues, health 
insurance premiums have increased about 10 percent a year on 
average for the last 10 years from 1999 to 2009, correct?
    Mr. Durham. Yes. Premiums reflect the average cost of care, 
and so if----
    Ms. DeGette. Right. They have been going up on an average 
of about 10 percent per year for the last 10 years or so. Is 
that right?
    Mr. Durham. Right.
    Ms. DeGette. Correct?
    Mr. Durham. Reflecting the average cost----
    Ms. DeGette. Yes or no.
    Mr. Durham. Yes.
    Ms. DeGette. Thank you. And so you wouldn't expect to see a 
dramatic reversal of this trend right now, would you?
    Mr. Durham. Oh, we have seen some reversal because of 
reduced utilization due to the downturn in the economy.
    Ms. DeGette. Oh, OK. OK. So that's because people aren't 
buying insurance, right?
    Mr. Durham. Or they are not using insurance as much. But we 
have seen----
    Ms. DeGette. Yes. So they are--they are not--so for once, 
and don't hold me to this, I actually agree with Mr. Burgess, 
which is, nothing is ever totally free, so if somebody doesn't 
get insurance and they get sick, somebody is still paying for 
their care. Is that correct?
    Mr. Durham. There is some payment through uncompensated 
care, yes.
    Ms. DeGette. Yes. Yes. Someone's still paying for it. And 
that's often the taxpayers, right?
    Mr. Durham. Right. And it often gets shifted to private 
plans as well, which increases premium costs.
    Ms. DeGette. So if it gets shifted to private plans, that 
increases the premium costs for those people, right?
    Mr. Durham. Correct.
    Ms. DeGette. Yes. So I wanted to ask you a question, Mr. 
Spiro. Have you looked at--have you looked at the memo that the 
Democratic staff released this morning about the results from 
Oregon, Washington, Maryland, Vermont, and Rhode Island?
    Mr. Spiro. I have not, but I am broadly familiar with the 
rate filings in those States.
    Ms. DeGette. So what they found out was in Oregon, rates 
for people who stay in comparable plans offered by their 
current insurance are expected to fall by about 7 percent, and 
in Washington, consumers will see average reductions by 25 
percent, and in Vermont, a similar result. What is your 
reaction to this kind of a finding?
    Mr. Spiro. I think, number one, it shows that some of the 
concerns have been inflated, in that in some of these States, 
the insurance executives, as I mentioned, were projecting 
increases of 50 to 70 percent, and it turned out not to be the 
case, so their concerns were overblown.
    Second, I think it shows that there is--despite actuaries 
making it seem like a science, there is a lot of flexibility 
and fudge room in what they do, and that projected costs based 
on very minor changes in assumptions can vary wildly.
    Ms. DeGette. Just one last question. You would expect 
competition to give a more apt competitive insurance price, 
right?
    Mr. Spiro. Yes. I think the interesting thing in Oregon, as 
I mentioned is, immediately after the rates were posted online, 
and not every State is as transparent as Oregon but that is 
something to be encouraged, but once the competitors saw those 
rates being posted, they immediately requested to the insurance 
commissioner that they be able to propose lower rates.
    Ms. DeGette. Thank you.
    Mr. Spiro. And those are just the proposed rates, so they 
haven't even been reviewed by the insurance commissioner yet.
    Mr. Murphy. Thank you. Time has expired.
    Now recognize Dr. Burgess for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman. Mr. Durham, I wasn't 
going to go here, but since I was provoked by the ranking 
member, let's go here for just a moment. Cost of people who 
show up with no insurance does cost those who have insurance 
something, doesn't it?
    Mr. Durham. Yes, sir.
    Mr. Burgess. But the greater amount of cross-subsidization 
that occurs is between the public plans, Medicare, Medicaid, 
and what they don't pay in covering the cost of the care 
rendered. Is that a fair statement?
    Mr. Durham. Correct. And that is often again passed through 
to practice.
    Mr. Burgess. And what is the larger group? People who show 
up in the emergency room without an insurance policy or 
Medicare and Medicaid that show up in the emergency room of the 
hospital?
    Mr. Durham. Medicare and Medicaid.
    Mr. Burgess. Yes, absolutely. That is the 9 percent cross-
subsidization. We like to push that off onto the uninsured, but 
in fact, it is the Federal Government not paying their fair 
share of the note; is that not correct?
    Mr. Durham. Correct.
    Mr. Burgess. Well, look, Mr. Spiro, let me just ask you, I 
have got your biography, I guess, in front of me. You are not a 
physician; is that correct?
    Mr. Spiro. That is correct.
    Mr. Burgess. But you did serve some time in the Senate 
Health, Education, Labor, and Pensions Committee?
    Mr. Spiro. Correct.
    Mr. Burgess. Was that time that you served there while a 
law that is now known as Affordable Care Act was under 
consideration?
    Mr. Spiro. Yes.
    Mr. Burgess. This is a good day for me because you may 
recall that the House had hearings and marked up a bill called 
H.R. 3200, and do you recall what happened to H.R. 3200?
    Mr. Spiro. I was a staffer on the Senate side.
    Mr. Burgess. Well, the correct answer is it vaporized. It 
went off into the ether. No one has seen it since November of 
2009 because the law that we are talking about, the Affordable 
Care Act, was actually a Senate bill; is that not correct?
    Mr. Spiro. It was a Senate bill, but it was very much 
informed by----
    Mr. Burgess. OK. Yes or no. It was a Senate bill.
    Mr. Spiro. But to finish my answer, there was----
    Mr. Burgess. The point I--I control the time.
    Mr. Spiro. May I finish?
    Mr. Burgess. The point I need to make here is that there 
are some things that many of us have wondered about over here 
on the House side. Now, we have just been told that the House 
has voted to repeal all or a part of the Affordable Care Act 
some 37 times, but there was one part of the Affordable Care 
Act that everybody agreed with, the 1099 provision. Do you 
remember the 1099 provision, the business-to-business 
transaction greater than $600 that was going to generate the 
issuance of a 1099 form?
    Mr. Spiro. Yes.
    Mr. Burgess. Was that part of the work you did in your 
Senate committee?
    Mr. Spiro. No. Part the work I personally did, I was not a 
tax counsel, but I am familiar with the provision.
    Mr. Burgess. So that is a portion of the Affordable Care 
Act that again there was broad bipartisan agreement that this 
was an onerous burden on--as a paperwork requirement on the 
businesses of this country, correct? And the President signed 
it into law. The President agreed with the Congress when that 
repeal portion came through
    Now, there is another bill that was voted on January 1st of 
this year called the--we called it a fiscal cliff bill. I 
actually voted against it, but one of the parts of it that I 
actually liked was the repeal of something known as the Class 
Act.
    Now, that was one of Senator Kennedy's projects. Did you 
work on the Class Act when you were on the Committee of the 
Health, Education, Labor and Pensions?
    Mr. Spiro. I did not, but I am familiar with it.
    Mr. Burgess. Well, the Class Act was again one of those 
aspects of the Affordable Care Act where there was broad 
agreement between Republicans and Democrats that this was 
something that would be better off repealed. And again, I guess 
the President agreed because the President signed that, did he 
not?
    Mr. Spiro. I think there was an acknowledgment that as 
structured, the Class Act, because it did not have an 
individual mandate, that it would spiral out of control, so----
    Mr. Burgess. Well, I think the language that the chief 
actuary used, because we heard him here in this very committee, 
that it was the classic insurance death spiral that the Class 
Act was fixing to inaugurate.
    Well, we have talked a lot today about pre-existing 
conditions. Were you part of the committee that worked on the 
pre-existing conditions----
    Mr. Spiro. Yes.
    Mr. Burgess [continuing]. Program? Well, do you know what 
has happened to the Federal pre-existing conditions program 
since January or February of this year?
    Mr. Spiro. A lot of things have happened with----
    Mr. Burgess. Well, they are out of money, and so people who 
were hoping to age into that system, and we have heard from 
them in this--already in the health subcommittee, they are now 
frozen out. There is no--they cannot be taken into that system, 
so they are basically on their own between February 1st and 
January 1st of 2014. Were you aware of that?
    Mr. Spiro. Do you want to provide more appropriations for 
that program?
    Mr. Burgess. Well, I was hoping to move all of the money 
from the prevention fund into the pre-existing plan, but I 
haven't quite been able to do that, and therein is the problem. 
You knew, when this part of the law was drafted in committee, 
you knew that it was woefully underfunded. There is no one in 
the world who thought $5 billion was going to be enough to do 
what you said it was going to do.
    Mr. Murphy. Gentleman's time has expired.
    Mr. Burgess. Do you have a thought on that?
    Mr. Spiro. The bill was designed in such a way so that it 
would reduce the deficit, and it met that test. Now, could it 
have provided more funding for the PCIP program? Yes. Would you 
have supported the program and the bill if it had done so?
    Mr. Burgess. Sir, with all due respect----
    Mr. Murphy. Time has expired.
    Mr. Burgess. I didn't support a single part of this, but I 
will save my followup questions for a second round.
    Mr. Murphy. Time has expired.
    Mr. Waxman is recognized for 5 minutes.
    Mr. Waxman. Thank you, Mr. Chairman.
    It is interesting that my colleague talked about the things 
for there was a bipartisan consensus like to take away the 
burden on businesses to file 1099s, but where was the 
bipartisan consensus to protect people from being charged more 
money or denied insurance because of pre-existing conditions?
    Mr. Burgess. Waiting on you----
    Mr. Waxman. Mr. Chairman, it is my time. There was no 
bipartisan consensus for that. All they wanted was to protect 
the industry, the businesses. Fine. We all agreed to do that, 
and we are going to make other changes in this law.
    Mr. Carlson, I want to ask you about your testimony. We 
looked it over, and I think that you got this to us very late. 
We just got it today. The rules require you to put it in 
earlier, but--so we are at somewhat of a disadvantage, but your 
testimony contains a review of premiums in three States 
recently released filings of proposed premiums, and you state 
that the average premium rates of the top three insurers in 
Oregon represent an increase of 36 to 53 percent over current 
premium rates. I would like to ask you a few questions about 
that.
    Did you separate out the bronze, silver, and other levels 
of plans from your calculations of the average premium and 
changes in premiums?
    Mr. Carlson. What I looked at was kind of the base rate. So 
as----
    Mr. Waxman. In other words, you didn't. You looked at a 
base rate, but there are several different kinds of plans under 
the Affordable Care Act. Did you do any comparison of the 
currents rates of plan with comparable actuarial value to 
silver and bronze plans to the proposed rates of silver and 
bronze plans that will be available in the marketplace?
    Mr. Carlson. I relied upon what was in the filings.
    Mr. Waxman. But the law requires that there be several 
plans, a silver and a gold plan and a bronze plan, and they all 
have to provide basic services but they relate to how much are 
the out-of-pocket costs. Did you look at those different plans 
in a different way or you treat them all the same?
    Mr. Carlson. Well, I looked at the average plan, so, 
obviously, each of those plans are----
    Mr. Waxman. You didn't look at an analysis then if people 
switched to the lowest cost silver and bronze plans offered in 
the marketplace; is that right?
    Mr. Carlson. Well, if they were to do so, they would also, 
their benefits would be reduced as well as their premium.
    Mr. Waxman. Yes, but you didn't look at that. Some people 
would choose to do that. They want a lower premium, so they are 
willing to take a lower plan. That is a reasonable thing to do, 
isn't it, have a choice?
    Did you make any attempt to calculate the savings 
individuals might see because their improved coverage would 
lead to a reduction in out-of-pocket spending?
    Mr. Carlson. No, I didn't consider the out-of-pocket 
spending.
    Mr. Waxman. Did you estimate the impact of premium tax 
credits available in the marketplace on effective premiums in 
Oregon?
    Mr. Carlson. Well, I mean, I am just looking at what the 
premium rate the insurance company is going to charge, not what 
the consumer is going to actually pay.
    Mr. Waxman. Well, I think what this hearing is supposed to 
be all about is what consumers might expect. So you didn't look 
at what a lot of consumers will appreciate, which is a lower 
cost to them because of the premium tax credit.
    Your testimony also differs in many important ways from the 
supplemental report that we put out. I know you haven't had a 
chance to do it, but our memo found that the average consumer 
currently enrolled in a bronze comparable plan would see a rate 
decrease of 11 percent and save $470 annually if they stay with 
the same insurer. If they switch to a lower cost bronze plan, 
consumers would save an average of 32 percent or over $1,300 
annually. I want to just bring this to your attention because 
there is a more complete analysis.
    Mr. Durham, you represent the insurance industry. Does the 
insurance industry support the full repeal of healthcare reform 
that the Republicans have voted on 37 times?
    Mr. Durham. We are focused like a laser on implementation. 
This is the law of the land, and our plans are working around 
the clock to----
    Mr. Waxman. Does your industry support repeal of the law?
    Mr. Durham. We haven't taken a position on repeal. We are 
focused on implementation.
    Mr. Waxman. What you don't like is the tax on insurance 
companies.
    Mr. Durham. We would like to see----
    Mr. Waxman. You would like to see that changed.
    Mr. Durham. Yes, because----
    Mr. Waxman. You don't want the whole law thrown out.
    Mr. Durham [continuing]. Adds to the cost of premiums and 
makes premiums less affordable.
    Mr. Waxman. I think your position shows how out of the 
mainstream my Republican colleagues are with their continuing 
push for full repeal of healthcare reform. I don't understand 
why Republicans would continue to vote for healthcare repeal 
that would cost 25 million Americans to lose health insurance 
coverage, increase the cost for millions of Medicare 
beneficiaries and increase the Federal deficit. My time is 
expired. I yield back.
    Mr. Murphy. Gentleman's time is expired.
    Now recognize Mr. Harper for 5 minutes.
    Mr. Harper. Thank you, Mr. Chairman.
    And thank each of you for taking your time to be here. This 
is something we are dealing with in every State, in every 
district. And for me, the calls began even before Obamacare was 
passed back in 2010 because people were worried about what was 
going to happen with their premiums, how they were going to be 
able to pay either the fine or provide health insurance when 
some of their businesses were on a very marginal rate.
    And Mr. Spiro, listening to some of the information brings 
back a lot of memories, but when we were calculating the price 
on this, the plan did not include SGR, did it? That was the 
cost to fix the doc fix, that was not a part of the plan, was 
it? That was not included in the calculation for the price.
    Mr. Spiro. The SGR is still part of current law.
    Mr. Harper. OK. My point is we didn't solve that because it 
would have driven up the cost, the price tag. I mean, it wasn't 
included in the law that came out, was it?
    Mr. Spiro. No, it was not.
    Mr. Harper. OK. You know, when you talked and you said 
something about additional money to fund preexisting, how do 
you feel about doing away with the preventive care slush fund 
that Sebelius has and using that money to help with 
preexisting?
    Mr. Spiro. How do I feel about that?
    Mr. Harper. Yes. I mean, you are sitting there talking 
about it. Do you support doing away with the preventive care 
fund and moving that money over to help those that need it most 
in preexisting?
    Mr. Spiro. As you may know, I worked for Chairman Harkin, 
so I support the prevention public health fund.
    Mr. Harper. OK. Even though that is being used for things 
that truly are not for preventive care. You have seen some of 
that already.
    Mr. Spiro. Being used for evidence-based practices to lower 
the cost of healthcare and improve----
    Mr. Harper. OK.
    Mr. Spiro [continuing]. Quality of healthcare.
    Mr. Harper. So the money used for lobbying for soda tax 
that came out of preventive care fund or that that was used for 
pet neutering programs, those are not--you consider that part 
of importance for preventive care?
    Mr. Spiro. I don't know what you are referring to.
    Mr. Harper. OK. Well, it is there.
    And if I may, Mr. Chairman, I am going to yield to Dr. 
Burgess.
    Mr. Burgess. I thank the gentleman for yielding.
    Mr. Durham, let me ask you a question on preexisting 
conditions. Because we were told in the run up to pass the 
Affordable Care Act that there were 8 to 12, 15 million people 
who had preexisting conditions and as a consequence could not 
get insurance. As of January 1st or January 30th when the 
program closed to new folks, do you know how many people were 
receiving insurance through the preexisting pool?
    Mr. Durham. I believe it was around 135,000.
    Mr. Burgess. So how do you explain the discrepancy between 
8 to 12 to 15 million people who we were told in the run up to 
this law, and 100,000, 150,000 that were actually in the pool 
when the doors closed?
    Mr. Durham. I don't have an explanation for that?
    Mr. Burgess. Well, wouldn't part of the explanation be in 
the large group market, under ERISA regulations, there are 
periods called open enrollment periods, where people who are 
hired onto say a large telecommunications company, they are 
hired on, they get on the insurance, if they have a preexisting 
condition, are they what, are they fired, are they turned down 
or what, what happens to them? They get insurance, don't they?
    Mr. Durham. Yes, through their employer.
    Mr. Burgess. And that is one of the issues. All of the 
debate leading up to the passage of the Affordable Care Act 
conveniently ignored that, yes, here is a group of people who 
have a problem, people in the individual market. They have a 
preexisting condition, they get frozen out of market, but 
people in the large group market, because of some existing 
Federal regulations, some of which I have a problem with, to be 
perfectly honest, but nevertheless, they get coverage when they 
get hired onto one of the multi-State corporations; is that not 
correct?
    Mr. Durham. That is correct.
    Mr. Burgess. So, the problem with preexisting conditions 
was actually one that perhaps was quite manageable, I would 
submit. It never required a new Federal agency to be stood up, 
and that is where most of the dollars in the PCIP program were 
wasted setting up a new Federal agency. It would have been far 
better served to help those States that already had risk pools 
of reinsurance or some other novel approach to help someone in 
the individual market who didn't have coverage, but for 
whatever reason, we decided that we needed a new Federal agency 
because I guess we didn't have enough already; is that right?
    Mr. Durham. I can't comment on the specific administrative 
side of the PCIP program.
    Mr. Burgess. Well, Mr. Spiro may have some recollection 
about that from his time on the committee, but we have already 
visited about that, so I will yield back. I did want to make 
that point, though. There is--the folks who have preexisting 
conditions are rarely in the large group market. They tend to 
be in the small group market and the individual market, and 
that was a fixable problem----
    Mr. Murphy. Time expired.
    Mr. Burgess [continuing]. Had the Congress had the will to 
do that.
    Mr. Murphy. OK. Gentleman's time expired.
    I recognize Mr. Butterfield for 5 minutes.
    Mr. Butterfield. Thank you very much, Mr. Chairman.
    Thank all of you for your testimony today. We have heard a 
lot today about premiums under ACA may actually increase, and a 
lot of these claims aren't accurate, in my opinion, because 
they don't take into account factors like the tax credits that 
will be available to many enrollees to reduce the cost of 
coverage. But some of this discussion simply misses the point.
    Under ACA, millions of Americans will have access to much 
better coverage, so even if they pay higher premiums, they will 
get a lot more for their money. Let me start off with Mr. 
Durham, if I can.
    Your testimony puts this in what I call clinical terms. It 
refers to the Affordable Care Act's minimal actuarial value 
requirements. In plain English, what does this mean?
    Mr. Durham. That is the percent of total healthcare cost 
that is paid by the plan versus the insured, so a minimum of 60 
percent actuarial value means the plan picks up 60 percent of 
the total cost. The beneficiary pays the other 40 percent.
    Mr. Butterfield. Has your industry projected with any 
certainty about how many more people will have insurance as a 
result of the Affordable Care Act?
    Mr. Durham. We have seen CBO projections in terms of----
    Mr. Butterfield. Do you accept that projection as valid for 
planning purposes within your industry?
    Mr. Durham. Generally, yes.
    Mr. Butterfield. And how many people do you project will 
get insurance?
    Mr. Durham. Well, let me see. I have got the latest CBO 
projections here with me. They estimate that--it looks like, in 
2014, there will be 9 million additional Medicaid and SCHIP; 2 
million will lose nongroup coverage; 7 million will gain 
coverage through the exchange.
    Mr. Butterfield. But the industry is preparing for a large 
influx of new enrollees in the--in the exchange.
    Mr. Durham. Well, that is our hope. And our main concern is 
that if premiums are not affordable, then those younger and 
healthier will opt not to purchase coverage, stay out, and that 
will deteriorate the risk pool.
    Mr. Butterfield. And that is why you focused on 
implementation. You want this thing to work, don't you?
    Mr. Durham. Yes. Our plans are competing in this new 
marketplace and have been working on implementation round the 
clock to get ready for the October 1 open enrollment.
    Mr. Butterfield. And the tax credits that you will be 
getting to assist with these premiums, that is money. That is 
real money that your companies will spend and use to--for your 
overhead and for other things that you do.
    Mr. Durham. Those tax credits will not reduce the premium 
cost, but they will help lower-income individuals pay for 
premiums, that is correct. But they do--they do phase out 
rapidly, so by the time you get up to around, according to CBO, 
about 250, 300 percent of Federal poverty level, those premium 
tax cuts are only paying for 40 percent of the premium, and so 
that is worth to note as well.
    Mr. Butterfield. Do you have any idea what the average 
premium will be, let's say for a 35-year-old single healthy 
adult in the average State?
    Mr. Durham. The average premium, I don't have that in front 
of me. I think for CBO's estimate, it is $5,200.
    Mr. Butterfield. And Ms. Ucello, do you have any projection 
on the average premium cost for a single adult?
    Ms. Uccello. No, and I would argue that there is no such 
thing as average.
    Mr. Butterfield. I think Kaiser comes out with like $330 a 
month, which is $4,000 a year or something. You are saying----
    Ms. Uccello. We have not done any projections.
    Mr. Butterfield. Because of the variations between the 
States and the different----
    Ms. Uccello. Across individuals and States, exactly.
    Mr. Butterfield. All right. So back to you, Mr. Durham. So, 
under the Affordable Care Act, plans on the exchange must offer 
policies that cover at least 60 percent of healthcare costs; is 
that correct?
    Mr. Durham. That is correct. That is the minimum actuarial 
value.
    Mr. Butterfield. But it can go up from there to 90 percent 
of the cost.
    Mr. Durham. That is correct.
    Mr. Butterfield. We have heard a lot of furor from my 
friends on the other side in this hearing and in previous 
hearings about potential large increases in premiums, but Mr. 
Spiro, your testimony walks through why some of these concerns 
seem to be overblown. For starters, people who currently have 
employer coverage, like Medicare and Medicare and other public 
coverage, are unlikely to be affected by premium changes; is 
that correct?
    Mr. Spiro. That is correct. It is almost 90 percent of the 
American population.
    Mr. Butterfield. And much of the remaining population, 
women and older people and people with preexisting conditions 
are likely to see lower premiums and not higher premiums. Would 
that be correct?
    Mr. Spiro. Correct. It depends, as Cori has mentioned, it 
depends on a lot of different factors. The group of concern 
would be young adults with higher incomes who don't qualify for 
full subsidies, and in my testimony, I said that the estimated 
fraction of the population that that is 0.5 percent.
    Mr. Butterfield. Mr. Spiro, if this act was completely 
repealed, what would happen to the number of uninsured people 
in our country?
    Mr. Spiro. Relative to the act being in place, I believe 
CBO's latest estimate, if I can borrow this----
    Mr. Durham. Sure.
    Mr. Spiro. Is that, you know, within 10 years, the 
Affordable Care Act will reduce the number of uninsured by 25 
million. Now, it would be much higher if all States expanded 
their Medicaid programs, so----
    Mr. Butterfield. That was going to be my final question.
    Mr. Spiro. And I expect that to be the case. Over time, 
States will realize what a good deal it is, how good it is for 
their economies, so I expect every State will eventually take 
up the expansion. And when the CBO estimated on that basis, the 
reduction in the number of uninsured was over 30 million.
    Mr. Butterfield. When you served on the Senate committee 
that helped put the finishing touches on this thing, did you 
ever imagine that States would decline to expand their Medicaid 
program to cover poor people within their States?
    Mr. Spiro. Well, first, I never imagined that the Supreme 
Court would make that expansion a voluntary option. Now, I 
don't think it is wise for States not to expand. One reason, 
since we are talking about premium impact, is that actually, in 
States that do not expand their Medicaid programs, premiums 
will rise in the exchanges.
    Now, why is that connected? It is because on average people 
who are lower income are sicker, it is a less healthy 
population, so if they are being covered under the exchanges, 
rather than under Medicaid, premiums are going to rise slightly 
in the exchanges, so I think it is an unwise policy----
    Mr. Murphy. Gentleman's times has expired.
    Mr. Spiro [continuing]. Not to extend Medicaid program.
    Mr. Murphy. Mr. Long is recognized for 5 minutes.
    Mr. Long. Thank you, Mr. Chairman.
    Mr. Spiro, you worked on the Hill up here and were a 
staffer. If you were a staffer today and wanted to get 
information on what your healthcare was going to cost you 
January 1st of next year, were would you suggest I go?
    Mr. Spiro. I am sorry, can you repeat the question?
    Mr. Long. My 5 minutes will be up. If you were working on 
the Hill today and you go to the Member of Congress--you worked 
for Senator Kennedy; is that right?
    Mr. Spiro. Right.
    Mr. Long. And you go to Senator Kennedy and you say, what 
is my health insurance? They have got this new Affordable Care 
Act coming in and Members of Congress and their staff are going 
to be under the exchanges, how much is my healthcare?
    Mr. Spiro. Yes.
    Mr. Long. Where would you go to get that information? Where 
can I--because these are the questions my staff has asked for.
    Mr. Spiro. Yes.
    Mr. Long. We are talking about the increased healthcare 
cost, so where can I get that information? I have been trying 
since January and I haven't been able to get it from anybody. 
Where would you suggest I go with your experience up here?
    Mr. Spiro. This is the beauty, Congressman, of the 
exchanges. Each State is going to have its own exchange, 
whether it chooses to establish its own exchange. If it 
doesn't----
    Mr. Long. Missouri is not going to--I mean, Missouri is not 
going----
    Mr. Spiro. If it does not, then the Federal Government will 
facilitate an exchange in that state and consumers can go 
online.
    Mr. Long. Today?
    Mr. Spiro. When the exchanges are functioning.
    Mr. Long. May 20th?
    Mr. Spiro. October 1st.
    Mr. Long. They go--OK, October 1st.
    Mr. Spiro. Yes. They can go online and see the rates and 
compare them, apples-to-apples comparison, makes it much easier 
to shop for and compare plans and that you will be able to see 
what your premium tax credit would be.
    So, we won't be talking about all these studies that don't 
take into account your premium tax credits. Consumers will 
actually be able to see how much they will actually have to pay 
out of pocket.
    Mr. Long. So that is October 1. So if you are a young--how 
old are you?
    Mr. Spiro. I am 38.
    Mr. Long. 38. OK. You look younger than that. If you--but 
if you are a young staffer up here living three and four deep 
in an apartment, as you know they do, trying to make a living 
and staffers back home that have one or two children, young 
family starting out, they are going to need to wait till 
October the 1st before they can then find out what their 
insurance is going to cost January 1st, so they are going to 
have October, November, December to make a decision on whether 
they want to stay employed here in public service or whether 
they need to find another job where they will have better 
coverage, correct? About three months.
    Mr. Spiro. The open enrollment period is 6 months, and it 
starts on October 1st, so it is a long period of time for 
people to enroll.
    Mr. Long. When you were talking to Mr. Butterfield there 
about the--repeat that about the 90 percent; 90 percent of the 
people will not see premium increases? Was that a category or 
something, or did I--surely that is not 90 percent of the 
public.
    Mr. Spiro. What Mr. Butterfield was pointing out was that 
the vast majority of Americans who have health insurance today, 
they either have it through their employers or through Medicare 
or Medicaid or the Veterans Health Administration, other 
government programs, and when you add up all those people, 
that's 90 percent.
    Mr. Long. And you are saying that their premiums are not 
going to rise.
    Mr. Spiro. I am saying that because we are focussing today 
on the impact of reforms to the non-employer market, the 
nongroup market, we are not talking about that 90 percent of 
the population.
    Mr. Long. I thought we were talking about the health 
insurance premiums under the Patient Protection and Affordable 
Care Act.
    Mr. Spiro. Correct. And the reform----
    Mr. Long. OK. Let me move on to another question. I had a 
CEO come to me, and he said, I am coming to you, I am coming to 
Senator McCaskill, Senator Blunt because I want you to realize 
how devastating this Affordable Care Act is to our company. We 
provided great healthcare.
    This is a local company in my town.
    Mr. Spiro. Yes.
    Mr. Long. They have 53,000 employees. To quote him, he 
said, we had great health insurance for our people. They loved 
it. It was affordable for us.
    Mr. Spiro. Yes.
    Mr. Long. If we comply with Affordable Care Act, it is not 
affordable. We cannot do it. The only thing we can rationalize 
is cut everybody back to under 29 hours a week, which that is 
not feasible. So what would you suggest to someone like that?
    I am talking to you and not them. What do you suggest to 
somebody like that? What do I tell a CEO that comes to me, 
53,000 employees, started out with one store in Springfield, 
Missouri, now, obviously, they have stores around the country, 
has built this company up and they are not able to keep the 
insurance they were promised, that they were promised, what do 
you tell somebody like that?
    Mr. Spiro. The first point I would make is that it was an 
option to grandfather their plan, so it was an option for them 
to keep their----
    Mr. Long. Are they past that deadline now?
    Mr. Spiro. Now, the second thing is that a lot of----
    Mr. Long. They don't think they can keep their plan, sir. 
If they can, I need the information out so I can get to them 
quick.
    Mr. Spiro. They had the option to keep their plan.
    Mr. Long. They can keep what they had exactly.
    Mr. Spiro. When the Affordable Care Act was enacted, they 
had the option to keep their plan, and they would be 
grandfathered or exempt from these reforms.
    Now, a lot of employers were finding, are talking about 
cost increases and blaming the Affordable Care Act. Well, as we 
discussed earlier, there has been a trend for 10 years of 
premiums increasing.
    Mr. Murphy. Gentleman's time has expired.
    Mr. Long. Is that clock not working or what?
    Mr. Murphy. Well, we gave you extra time on that.
    Mr. Long. Very well. Yield back.
    Mr. Spiro. Their policies not necessarily----
    Mr. Murphy. Mr. Spiro, we are going into the next--I would 
appreciate it if you could try to keep your comments under 
time.
    Mr. Green recognized for 5 minutes.
    Mr. Green. Thank you. Thank you, Mr. Chairman, and I guess 
I have had a whole line of questions, but in an earlier life, I 
actually managed a business and part of our employees were 
under a union bargaining agreement and part of the office 
personnel were not, but--and one of my jobs was to negotiate 
for a small firm for their insurance premiums. In the years 
that I did that, I never had my insurance company come in and 
say, we are not going to increase your premiums 10 percent, 
sometimes even 25 and 30 percent.
    So, for us to say that we cannot guaranty insurance premium 
increases, didn't happen in the real world for the last 30 
years because I know they went up. I know they went up on my 
business. I know they went up on even large businesses. And so 
that is what boggles my mind because, frankly, we have this 
huge pool of people who are not paying into anything right now. 
And so my hospitals have to cover them by Federal law, and we 
are not going to change that. Why shouldn't we have some type 
of mandate to go in there?
    And frankly, I am familiar with my colleague from 
Missouri's company because I am a customer of that company, and 
it is a retail operation, and I think they would qualify. But 
in all honesty, I want to compliment you, Mr. Spiro, my 
colleague from Missouri has never told me I look younger than I 
am.
    But let me talk about some of things, though, that were in 
the bill that, for example, the preexisting conditions. My 
colleague from Texas, Dr. Burgess talked about it, that it is 
mainly in the smaller groups, and it is right. Under ERISA, you 
have certain rules that once you are an employee--and mostly 
yours only covers very large employers, you got that coverage. 
But I can tell you in the smaller group, in State government 
policies, which were individual and smaller group, they weren't 
coming under multi-State requirements. They did not have that, 
and so they could actually write people out for preexisting, 
and I will give you my example.
    When I was negotiating with a company, for an insurance 
company for our 13 employees, they came to me after 3 years and 
said, we can lower the increase in your premiums if you would 
exclude this person in there and later go to the individual 
market because she just happened to have a double mastectomy, 
and it was only my job to negotiate. I wasn't the owner of the 
company. And I said, well, I appreciate that, but that lady had 
a double mastectomy, she works here and she is the wife of the 
owner. I will share that information with them because that is 
what happens in the real world and that is why the preexisting 
condition is so important in the Affordable Care Act.
    And by the way, that is not the only thing. A lot of my 
colleagues--I know I didn't like the Senate bill. I am a House 
Member. I know what the Senate did. They took our House number 
and amended it. In our House bill, we fixed the SGR. In our 
House bill, we did not have an iPad in there. In our House 
bill, we did not include Senator Kennedy's long-term care 
because we couldn't afford it but we did include preexisting 
conditions. And yet, to a person on the Republican side, they 
all voted against those things even though they were in the 
House bill, and they were added in the Senate bill, and they 
didn't vote for it either then.
    So, to sit here and say we didn't fix SGR, we did, and I 
still cannot imagine why the United States Senate didn't fix 
that because I don't think we can find any one of the Senators 
over there to support the SGR any more than we can found a 
House Member to do it.
    But Mr. Spiro, I appreciate your--and I know my colleague 
talked about the 90 percent of the Americans--insured Americans 
have employer covered insurance, and I regret the Supreme 
Court's decision on Medicaid. I also served as a State 
legislator, and in Texas, State legislators are not full-time. 
You get $600 a month, whether you earn it or not. So all of us 
had other income, and that was part of my management of that 
printing company that I learned about insurance from a buyer's 
point of view in small group insurance. But, and again, coming 
from Texas, we have a huge number of people who are uninsured.
    I have one of the largest districts in the country with 
people who work and yet their employer doesn't provide 
insurance for them. So, the Affordable Care Act, one of the 
benefits was Medicaid--we have a lot of working poor because 
you have to be pretty destitute and poor to get Medicaid in 
Texas to begin with, but if you are a working poor, you still 
don't get it now under the Affordable Care Act. So, and I know 
that has been discussed, and a lot of legislators all over the 
country, and I wish we would change that because that was one 
of the goals is to make sure these folks, if you are making $15 
an hour and have three or four children, there is no way you 
can afford insurance premiums and still be--and still pay for 
rent and everything else.
    Mr. Chairman, I know a lot of the questions have been asked 
that I already have, but I appreciate my colleagues, and I 
appreciate your patience today.
    Mr. Murphy. Thank you. Now we will recognize Mr. Olson for 
5 minutes.
    Mr. Olson. I thank the Chair, and welcome to our witnesses.
    I am the congressman for Texas 22, which is a suburban 
district right outside of Houston. I go home every week and try 
to go out to eat a meal with my family at a restaurant one day 
when I am home because there is no better place in Texas, none, 
to get the feel of Texans when you are at a restaurant.
    They are scared of Obamacare and what it is going to do to 
the healthcare of their family. Every time I go to eat at a 
restaurant, whether it is breakfast, lunch or dinner, they tell 
me stories about the broken promises that have been made by 
Obamacare. If they provide their own health insurance, it is 
going to go up somewhere between 5 and 43 percent. That is from 
a study this committee determined, 5 to 43 percent. That is a 
broken promise. If their employer provides insurance, it is 
going up to 23 percent increase of their cost, or they lose it. 
That is a broken promise.
    These people have been hurt by this weak economy. They 
don't have more money to spend on healthcare. They are tapped 
out. They are not just afraid of Obamacare. They are terrified 
of it.
    I represent the most diverse district in America, and they 
express these same fears regardless of ethnicity, religion, 
gender, or age. It happens all the time back home. At Bob's 
Taco Station in Rosenberg or barbecue lunch at The Swinging 
Door in Richmond, Texas, or a steak dinner at Killen's in 
Pearland, Texas. These good scared Texans agree with Senator 
Baucus, Obamacare is a train wreck coming down the tracks.
    I want to focus on one of these broken promises, is that 
young American will purchase their healthcare. They won't. They 
will get it when they need it, as they are driving to the 
hospital to get their healthcare. I am a former naval aviator. 
There is a thing in aviation called a death spiral and that is 
a situation where the aircraft, it starts out benignly enough, 
but then it starts spinning, spinning spinning and eventually 
you can't regain control and you can't eject out of the 
airplane, hence the term death spiral. My questions to you, Mr. 
Durham, if young Americans don't purchase healthcare, they 
forego that, does that put Obamacare into a death spiral?
    Mr. Durham. It could if young Americans, young healthy 
individuals do not purchase coverage, that could increase cost 
for everyone who remains in the risk pool and that could have 
an adverse effect. That compounds over time, so depending on 
how many younger and healthier individuals opt out and pay the 
penalty, it could certainly compromise the risk pool, which 
could lead to that type of situation down the road.
    Mr. Olson. So another broken promise. And we have got some 
actuarials here. I mean, Ms. Ucello, Mr. Carlson, how about the 
death spiral? If young people do not get involved in this 
healthcare bill, like I think is going to happen, is that going 
to start a death spiral with Obamacare getting more and more 
people coming into the exchanges because their employers got 
rid of healthcare insurance, all these things are happening on 
January 1st. I mean, that sounds to me like a death spiral.
    Ms. Uccello. As I mentioned earlier, the viability of the 
market does rely on bringing in lower-cost people to offset the 
cost of the higher-cost people, and the guaranteed issue 
provision will provide more incentives to bring in the high-
cost people. But the individual mandate and the premium 
subsidies will help to mitigate that effect by providing 
incentives to bring in lower-cost people. So it depends on how 
effective those provisions are at mitigating the other upward 
pressures on premiums.
    Mr. Olson. Mr. Carlson, you care to elaborate, sir?
    Mr. Carlson. Well, I think I agree with what Ms. Ucello 
said, and you know, because of the premium tax credits there, 
there is kind of a floor, but it doesn't minimize the 
importance of bringing young healthy individuals into the pool.
    Mr. Olson. OK. It is about time.
    I yield back the rest of my time, sir. Thank you all.
    Mr. Murphy. Gentleman yields back.
    I now recognize Ms. Schakowsky for 5 minutes.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    Mr. Carlson, in reading your testimony, you said, for the 
individuals that are expected to be eligible to receive premium 
subsidies in the exchanges, the amount they actually pay may be 
less and sometimes substantially less. So, your analysis did 
not take into account the out-of-pocket cost that people are 
going to pay, given the premium subsidies, right?
    Mr. Carlson. Correct. My report looked at what the 
insurance company would charge in premium rate.
    Ms. Schakowsky. And following up on the--oh, did Mr. Olson 
leave? He was talking about young people and getting them in 
the plans.
    Mr. Spiro, isn't it true that when young people have been 
surveyed, the main reason that they don't get health insurance, 
my understanding is, is the cost of health insurance, that they 
would, and isn't it also true that young Americans tend to have 
lower incomes and could be some of the biggest beneficiaries of 
the premium subsidies. I wondered if you would reflect on 
younger people getting in the plan.
    Mr. Spiro. Right. So, as I said, 70 percent of young adults 
with non-employer coverage would be eligible for Medicaid or 
the exchange subsidies, and in many cases, those subsidies 
would be very generous and lower the costs that they see.
    I do want to mention that there are three things that this 
committee could do constructively to mitigate any premium 
increases. One is, don't scare away young Americans by talking 
about rate shock all the time. Second is encourage Medicaid 
expansion, because as I mentioned before, in States that don't 
expand their Medicaid programs, premiums will be slightly 
higher in exchanges as a result. And third, fund consumer 
assistance and education. The exchanges are there to lower 
barriers to young Americans, to make it easier to shop for and 
compare plans. But one thing that you can really do, if you are 
concerned about rate shock, is to provide more funding for 
consumer outreach and assistance.
    Ms. Schakowsky. The other thing I was interested in.
    Mr. Olson was talking about how fearful people were because 
of the rate increases that they are experiencing, but only five 
States have said what the rates are going to be.
    Mr. Durham, does anybody know right now what kind of 
increases--I mean, we know that they have been going up every 
year as Mr. Green pointed out, but when they talk about, oh, my 
rates are going to go up this, my rates are going to go up 
that, do we really know that already?
    Mr. Durham. We don't yet. We won't know for sure until the 
rates are actually approved and individuals can start shopping 
on the exchange Web sites and the like come October 1st, so 
there is still a long way between now and then. A number of 
States are still----
    Ms. Schakowsky. So blaming Obamacare for increases in rates 
at this point is not really accurate, is it?
    Mr. Durham. Well, I think what we are conveying through the 
studies that have been talked about this morning is a number of 
actuarial firms have indicated that there are provisions in the 
Affordable Care Act that put upward pressure on premiums. It is 
variable, depending on the age, health status, location and the 
current coverage the individual has, and so it is more shaping 
the environment than the----
    Ms. Schakowsky. Well, let me ask--anybody can answer this. 
But seems to me, for example, that competition is not really 
taken into account. In Maryland, Blue Cross, the largest 
carrier in Maryland, and we do have it, proposed a 25 percent 
average increase for its 2014 individual market. Other plans 
saw smaller increases, in some cases, below annual trends in 
years prior to health reform. For example, Kaiser Permanente's 
average rate increased only by 4.3 percent.
    So, wouldn't it make sense, Mr. Spiro, that in a 
marketplace, that if you could compare rates and go online and 
find that, that you would take a Kaiser Permanente over a Blue 
Cross/Blue Shield then?
    Mr. Spiro. Yes. I think the exchanges are working as 
intended, and there is intense competition among insurers 
because the premium subsidies are linked to the second lowest 
cost plan, so they want to be close to that plan.
    In Maryland, as it turns out, the original proposal from 
CareFirst was for a 50 percent increase, and then they lowered 
it to 25 percent, and that is proposed. So, after the Maryland 
insurance commissioner reviews that rate, it is probably going 
to come down even more. And as you said, there are other plans 
available that will be cheaper and consumers can vote with 
their feet, with their pocketbooks and choose those plans.
    Ms. Schakowsky. Thank you.
    Thank you, Mr. Chairman.
    Mr. Murphy. Thank the gentlelady whose time has expired.
    Now recognize the gentlelady from North Carolina, Ms. 
Ellmers for 5 minutes.
    Mrs. Ellmers. Thank you, Mr. Chairman.
    Thank you to our panel for being here today. Ms. Ucello, 
there has been discussion today about decreases in premium 
costs, and one of those discussions focuses around reinsurance. 
Can you very quickly give a description of what reinsurance is?
    Ms. Uccello. Sure. Reinsurance is that plans who have a 
high-cost person who spends, you know, has a catastrophic 
accident or something, that plan is going to be reimbursed for 
the spending on that person, and so by reimbursing that 
spending, their costs are, in effect, subsidized so they can 
lower their premium.
    Mrs. Ellmers. And who pays that subsidy or that 
reimbursement?
    Ms. Uccello. So, in this particular reinsurance program, it 
is for the individual market and it is funded by assessments on 
all plans.
    Mrs. Ellmers. So all plans will pay an increased cost.
    Ms. Uccello. It is a----
    Mrs. Ellmers. To pay for the subsidy?
    Ms. Uccello. Yes, but it's a--Chris, I don't know if you 
know. It is like it is $5.
    Mr. Carlson. $5.25.
    Ms. Uccello. $5.25 per member.
    Mr. Carlson. And it includes self-insured plans have to pay 
it, too.
    Mrs. Ellmers. And I am sorry, $5.25. What--can you----
    Mr. Carlson. Per individual per month. So every member 
that's enrolled in the plan, whether it is insured or self-
insured, they're responsible for paying $5.25 per month for 
that individual.
    Mrs. Ellmers. $525?
    Mr. Carlson. No, $5.25.
    Mrs. Ellmers. $5.25. Kind of--OK. So it is kind of an 
insurance on the insurance.
    Ms. Uccello. Exactly.
    Mrs. Ellmers. And the individual pays that for that 
premium, the individual pays that.
    Ms. Uccello. It is incorporated into that----
    Mrs. Ellmers. The cost.
    Ms. Ucello [continuing]. Premium for----
    Mrs. Ellmers. OK.
    Mr. Carlson, the subsidies. As far as--I keep hearing about 
the, you know, the tax subsidies and subsidies. Who pays the 
subsidies and who benefits from that? What group? Is it income-
based, I am assuming.
    Mr. Carlson. It is income based. You know, where those 
funds come from is the general Treasury basically.
    Mrs. Ellmers. So basically the hardworking taxpayers of 
America are paying for that.
    Mr. Carlson. Yes.
    Mrs. Ellmers. But we don't really know what that cost is. I 
mean, overall, do we know what that cost is, how we are going--
--
    Mr. Carlson. No, I think CBO has made assumptions. I don't 
know them offhand.
    Mrs. Ellmers. And who would benefit? I mean, is there--when 
I say income-based, I mean, which individuals will be able to 
benefit from these subsidies?
    Mr. Carlson. Well, it is everybody up to 400 percent of the 
federal poverty line, which I believe was $40,000-some for an 
individual and $80,000, $88,000, I think, for a family of four.
    Mrs. Ellmers. OK. Mr. Durham, part of the discussion today 
is based on the numbers as they are today and implementation, 
and you identified that your organization that you are with is 
headed with this being fully implemented; is that correct?
    Mr. Durham. That is correct.
    Mrs. Ellmers. OK. Now, has that been--the thought that 
there are employers who currently cover their employees with 
healthcare plans, is that being taken into consideration, 
because many have said that they will not be able to afford 
this and will have to drop the coverage that they now have on 
their employees. Has that been taken into consideration?
    Mr. Durham. In terms of the implementation work that our 
plans are doing, it is focused on applying to be a qualified 
health plan through the federally facilitated exchange. So that 
window just closed and CMS is now reviewing those plans. We are 
also applying----
    Mrs. Ellmers. But the point is, is that you really haven't 
projected, yes or no, you have not projected how many plans--
how many healthcare plans will be dropped and forced onto 
exchanges or----
    Mr. Durham. CBO has projected that. I believe their 
projections are 6 million in 2016, and that goes up to 7 
million in later years.
    Mrs. Ellmers. OK. Mr. Spiro, I have one question for you. 
You had cited CBO saying that there will be a decrease of 25 
million with implementation of Obamacare, that 25 million 
people who are now uninsured will be insured. Well, I also have 
a CBO number, and I am wondering if you can explain this to me. 
May 13th, the CBO came out and said that by 2023, with 
implementation of Obamacare, there will still be 30 million 
people left uninsured. Can you describe or explain that 
discrepancy in about 10 seconds?
    Mr. Spiro. Well, for some people, the cost of insurance 
will still be too high. For some people, some people are 
undocumented immigrants.
    Mrs. Ellmers. So this is in accordance with undocumented 
immigrants; is that how you describe it?
    Mr. Spiro. Undocumented immigrants make up a big chunk of 
the remaining uninsured, yes.
    Mrs. Ellmers. All right. Thank you, sir. I see my time has 
expired.
    Mr. Murphy. Thank you.
    I recognize the gentlelady from Florida, Ms. Castor 5 
minutes.
    Ms. Castor. Thanks, Mr. Chairman, and thank you for calling 
this hearing because it is--I appreciate the panel because it 
is important for all of us to try to cut through some of the 
political rhetoric right now. I know that is difficult here in 
the Congress, but you know, when you--when you cut through some 
of that, that rhetoric, there are some very important reforms 
and opportunities for small businesses across America and 
individuals, and you just have to look at my State of Florida, 
where about 20 percent--it is actually a little more than 
that--of individuals in the State of Florida do not have access 
to health insurance. Over time, it has just been--it has been 
warped because we kind of kept sick people out, took care of 
people who were healthy. The large group plans are functioning 
fairly well, except for these big premium increases over time, 
but part of the problem is this huge chunk of the uninsured.
    So, what the Affordable Care Act does is it gives these 
folks some important insurance market reforms. It gives them an 
opportunity to take personal responsibility and come into the 
market. In Florida, you know, many people in the tourism 
industry, in retail, the mom and pop restaurant down the street 
that just didn't have the wherewithal to go out into the 
individual or small business market and afford insurance. So 
the Affordable Care Act improves the insurance market in two 
important ways for these folks.
    One, it requires that insurers offer high quality coverage 
to all without discriminating against people who have 
preexisting conditions, like cancer, diabetes or asthma. And 
another way of saying that is that people cannot be denied any 
longer just because they were sick or had a preexisting 
condition.
    Second, the Affordable Care Act provides some very 
important tools to make it affordable for small businesses and 
individuals. Specifically, for small businesses, one of the 
great secrets that this committee could really to help to 
spread word on is the fact that we have very substantial tax 
credits available for our small business owners now. Over 
360,000 small businesses across America have already taken 
advantage of them, and there are millions and millions more 
small businesses that will be available--that can take 
advantage of the tax credits.
    We also help small businesses by creating this new online 
marketplace, because what we--what we do, we empower those 
small businesses now, give them the same negotiating power that 
the larger employers had in the marketplace by pooling everyone 
together. So, for small business owners, this is going to be a 
very positive sea change where they will be able to have that 
kind of health security and economic security for the owners 
and their employees.
    Now, for individuals, the Affordable Care Act provides very 
substantial tax credits to families, up to about 400 percent of 
the poverty level, and people just don't know, that is a good 
middle class family all the way up to maybe $80,000, $90,000, 
folks can get some type of tax credit. The medium income in my 
hardworking district in the Tampa Bay area is about $35,000 per 
year. A great majority of these folks are going to be able to 
tap these very robust tax credits.
    What I would suggest for people that want to cut through 
the political rhetoric is they go to the independent Web site 
of the Kaiser Family Foundation. They set up a calculator to 
estimate the value of these tax credits for families. It shows 
that a family of four making the medium national household 
income of $50,000 will receive tax credits worth up to $6,500.
    Mr. Spiro, I wondered, talk to us about how these tax 
credits will help families afford health insurance coverage. 
What has been happening in the market prior to this time as 
these reforms roll in?
    Mr. Spiro. I think one important thing to note about the 
tax credits is they are advanceable. You can get them right 
away. You don't have to wait till you file your taxes at the 
end of the tax year. So it really is an immediate reduction in 
the costs you would pay out of pocket. You can see it online 
when you go to the exchanges, what costs you would have to pay. 
The exchange will automatically determine how much you are 
eligible for.
    And so, for young Americans, this is going to be very 
important because they disproportionately have lower incomes, 
and they are the key population, as Cori and others, really the 
whole panel, I think, agrees, they are the key population that 
we want to enroll because they are young and healthy and they 
will keep average premiums low for the whole exchange 
population.
    Ms. Castor of Florida. Thank you.
    Mr. Murphy. Gentlelady's time has expired.
    Now recognize the gentleman from Ohio, Mr. Johnson, for 5 
minutes.
    Mr. Johnson. Thank you, Mr. Chairman.
    I appreciate the witnesses being here today, by the way. 
Thank you for taking the time.
    For Ms. Ucello and Mr. Carlson, could you identify, please, 
the aspects of the law that may lead to premium decreases?
    Ms. Uccello. Did you say decreases?
    Mr. Johnson. Yes.
    Ms. Uccello. So the factors that will put downward pressure 
on premiums, again, include the individual mandate and the 
premium subsidies, which will help bring in the young and 
healthy into the insurance market and put, like I said, 
downward pressure on premiums. In addition, the premium 
subsidies themselves will directly lower net premiums.
    There is also the reinsurance program, which by, again, 
reimbursing plans for their high-cost enrollees will act as a 
subsidy to the plan, so that will lower premiums.
    There is also the availability of the catastrophic plans 
for the adults up to age 30 and to those exempt from the 
mandate, those plans are going to be able to have adjustments 
to their premiums to reflect the lower expected costs of that 
population. So those are some of the things that will help put 
downward pressure on premiums.
    Mr. Johnson. Any addition to that, Mr. Carlson?
    Mr. Carlson. Well, there were two things I would mention. 
One, certainly, I would agree that the open competition on the 
exchanges will, you know, force plans to be careful about their 
pricing and make sure they have competitive rates. However, on 
the other hand, you know, they still have a financial 
responsibility to make sure that they have a premium that is 
sufficient to cover the claim. So, I think that competition 
will help there, but on the other hand, you still have to fund 
the benefits.
    And I think the other item that has been discussed is the 
question of uncompensated care, and the more young individuals 
and the more enrollment you can get into the program and 
minimize the uninsured population as much as you can, that will 
allow plans to get rid of that cost shifting from the uninsured 
to the commercial market.
    The problem is that that will take time for those things to 
work out and in the system, so that is kind of a longer term 
goal.
    Mr. Johnson. Well, these things that decrease a premium, 
and obviously you've identified some things that would or 
could, do these items that lower premiums outweigh the items 
that will increase premiums under the law?
    Mr. Carlson. Certainly not in the short term. I mean, 
they're----
    Ms. Uccello. And I think it also depends on for whom you're 
talking. In certain States, it's possible that there could be 
premium decreases if they already have market rules that are 
similar to those that will go into effect in 2014.
    Mr. Johnson. OK. Mr. Durham, as you are aware, the IRS will 
be responsible for implementing a great deal of the health care 
law, mainly enforcement. Have you or your association had any 
discussions with the IRS about what that role will be, and what 
the industry can expect from the IRS?
    Mr. Durham. I have not personally had discussions with the 
IRS, but other members of my team have had discussions with the 
IRS. They play a very significant role in implementation, 
clearly, with regard to the advanced premium tax credits and 
the system build to ensure that the right information is 
available to help plans for enrollment.
    Mr. Johnson. OK. You know, as costs continue to rise, the 
health care law defenders now say that even though they 
promised lower costs, that it really doesn't matter if premiums 
go up, because as Ms. Uccello just pointed out, the subsidies 
will help. Well, these subsidies phase out after 400 percent of 
Federal poverty level, which is about $44,000 for an 
individual, $94,000 for a family of four.
    Have you conducted any analysis that has analyzed the 
impact of the subsidies nationwide, how many individuals will 
receive them and at what level?
    Mr. Durham. We have not, but I could look into that for 
you.
    Mr. Johnson. OK. My time is almost ready to expire, and I 
just wanted to end with this comment, Mr. Chairman. You know, 
the President promised a lot of things in the Affordable Care 
Act, two very striking things. He said costs will go down, and 
he said if you want to keep your current health coverage, that 
you can do so.
    I have heard it repeated by my colleagues on the other side 
several times today that in order to get your premium to go 
down, you're going to have to take less benefits. That doesn't 
sound like the promise that the President made to the American 
people, in my view. And with that, I yield back.
    Mr. Murphy. The gentleman yields back.
    I ask unanimous consent for the majority report of March 
14th be included in the record. And so ruled.
    [The information appears at the conclusion of the hearing.]
    Mr. Murphy. Ms. DeGette, you have----
    Ms. DeGette. Yes.
    I ask unanimous consent for the May 13th Democratic memo, 
the May 20th Democratic memo, a letter to this committee dated 
May 20th from Families USA, and a letter dated May 20th to this 
committee from AARP. And you have all of those, Mr. Chairman.
    Mr. Murphy. Yes. Without objection, they'll also be 
included in the record.
    [The information appears at the conclusion of the 
hearing.]]
    Mr. Murphy. In conclusion, I'd like to thank our witnesses. 
Thank you very much. You've given us a lot to think about today 
and we deeply appreciate your candor and your data. Other 
questions will be following up.
    And I remind members they have 10 business days to submit 
further questions for the record. And I ask all the witnesses 
please respond promptly to the questions, because we do 
appreciate your information on that.
    With that, this subcommittee is adjourned.
    [Whereupon, at 6:01 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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