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




 
         PROTECTING AMERICANS FROM ILLEGAL BAIL-
           OUTS AND PLAN CANCELLATIONS UNDER THE 
           PRESIDENT'S HEALTH CARE LAW

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 28, 2014

                               __________

                           Serial No. 113-167




[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]




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

                                 7_____

                         Subcommittee on Health

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

                                  (ii)
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     2
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     3
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     4
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     5
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................    52

                               Witnesses

Stan Veuger, Resident Scholar, American Enterprise Institute.....    14
    Prepared statement...........................................    16
Jack Hoadley, Research Professor, Georgetown University..........    21
    Prepared statement...........................................    23
Edmund F. Haislmaier, Senior Research Fellow, The Heritage 
  Foundation.....................................................    27
    Prepared statement...........................................    29

                           Submitted Material

Memorandum of January 23, 2014, from Edward C. Liu, Legislative 
  Attorney, Congressional Research Service, to House Energy and 
  Commerce Committee, submitted by Mr. Pitts.....................     7
Article of May 21, 2014, ``Critics call Obama funding plan for 
  health insurer losses `bailout,' '' by Noam N. Levey, Los 
  Angeles Times, submitted by Mr. Pitts..........................    10
Blog post of June 19, 2014, ``Insurers Expect $1 Billion in Risk 
  Corridor Payments, Committee Finds,'' by Sara Hansard, BNA 
  Bloomberg, submitted by Mr. Pitts..............................    13
Staff report of July 28, 2014, ``ObamaCare's Taxpayer Bailout of 
  Health Insurers and the White House's Involvement to Increase 
  Bailout Size,'' by House Committee on Oversight and Government 
  Reform, submitted by Mrs. Ellmers \1\
H.R. --------, the Protecting Americans from Illegal Bailouts Act 
  of 2014, submitted by Mr. Pitts................................    54
H.R. 3522, the Employee Health Care Protection Act of 2013, 
  submitted by Mr. Pitts.........................................    56
H.R. 4406, the Taxpayer Bailout Protection Act, submitted by Mr. 
  Pitts..........................................................    58

----------
\1\ The report is available at http://docs.house.gov/meetings/IF/
  IF14/20140728/102551/HHRG-113-IF14-20140728-SD006.pdf.

 
PROTECTING AMERICANS FROM ILLEGAL BAILOUTS AND PLAN CANCELLATIONS UNDER 
                    THE PRESIDENT'S HEALTH CARE LAW

                              ----------                              


                         MONDAY, JULY 28, 2014

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 4:01 p.m., in 
room 2123, Rayburn House Office Building, Hon. Joseph R. Pitts 
(chairman of the subcommittee) presiding.
    Members present: Representatives Pitts, Burgess, Blackburn, 
Gingrey, Lance, Cassidy, Guthrie, Griffith, Bilirakis, Ellmers, 
Pallone, Green, Barrow, and Waxman (ex officio).
    Staff present: Nick Abraham, Legislative Clerk; Sean 
Bonyun, Communications Director; Leighton Brown, Press 
Assistant; Noelle Clemente, Press Secretary; Paul Edattel, 
Professional Staff Member, Health; Sydne Harwick, Legislative 
Clerk; Katie Novaria, Professional Staff Member, Health; Heidi 
Stirrup, Health Policy Coordinator; Ziky Ababiya, Democratic 
Staff Assistant; Karen Lightfoot, Democratic Communications 
Director and Senior Policy Advisor; Karen Nelson, Democratic 
Deputy Committee Staff Director, Health; and Matt Siegler, 
Democratic Counsel.
    Mr. Pitts. The subcommittee will come to order. The Chair 
will recognize himself for an opening statement.

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

    Today's hearing is once again about protecting taxpayers 
and consumers from the consequences of the Affordable Care Act; 
namely, a giveaway of taxpayer dollars to insurers, under the 
ACA, and another round of planned cancellations in the group 
market.
    First, Section 1342 of the Affordable Care Act created what 
are known as risk corridors, a mechanism that will protect 
insurance companies from some of the financial losses they face 
under the Affordable Care Act. It works by decreasing payments 
to plans whose expenses are below projections, those with 
healthier than expected enrollees, and redistributing those 
dollars to plans whose expenses exceed projections, those with 
sicker than expected enrollees.
    The risk corridor provision is in effect from 2014 through 
2016, if done in a budget-neutral fashion, taxpayers would have 
little to be worried about when it comes to risk corridors, but 
while the administration has paid lip service to the risk 
corridor program being budget neutral, it has also indicated 
that, quote, ``regardless of payments and receipts, HHS will 
remit payments as required under Section 1342 of the Affordable 
Care Act,'' end quote.
    Opening the door to what would essentially be a taxpayer-
funded bailout of health insurers. Additionally, according to 
the Congressional Research Service and a plain reading of 
Section 1342, the law does not provide an appropriation for 
these payments. In the absence of a congressional 
appropriation, any payments are clearly an end-run around 
Congress and, therefore, illegal. The very idea of risk 
corridors assumes that there will be winners in the insurance 
industry wjhose gains can be shifted to the losers.
    However, the President's decision to selectively enforce 
provisions of the ACA along with higher enrollment of older and 
sicker individuals than was originally projected, could cause 
industry-wide losses, putting the taxpayer on the hook for 
billions of dollars in payments.
    The committee will consider legislation today to protect 
taxpayer dollars from being unlawfully given to health 
insurance companies under the risk corridor program.
    Second, as we have noted in previous hearings, the 
President promised numerous times that if you liked your 
healthcare plan, you could keep it. However, millions of 
Americans experience plan cancellations in the individual 
market last fall, and millions more will likely lose their 
employer-sponsored plans in the future. Dr. Cassidy's 
commonsense bill, H.R. 3522, the Employee Healthcare Protection 
Act, would permanently grandfather all group plans issued by 
health insurers that were in existence in 2013, allowing 
consumers to keep the coverage they like and giving small 
businesses better options than ACA-compliant plans.
    I would like to thank all of our witnesses for being here 
today to discuss these issues. And I yield back the balance of 
my time, recognize the ranking member, Mr. Pallone, for 5 
minutes for an opening statement.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    Today's hearing is once again about protecting taxpayers 
and consumers from the consequences of the Affordable Care Act, 
namely an unlawful giveaway of taxpayer dollars to insurers 
under the ACA and another round of plan cancellations in the 
group market.
    First, section 1342 of the Affordable Care Act (ACA) 
created what are known as ``risk corridors,'' a mechanism that 
will protect insurance companies from some of the financial 
losses they face under the Affordable Care Act.
    It works by decreasing payments to plans whose expenses are 
below projections (those with healthier-than-expected 
enrollees) and redistributing those dollars to plans whose 
expenses exceed projections (those with sicker-than-expected 
enrollees).
    The risk corridor provision is in effect from 2014 through 
2016.
    If done in a budget-neutral fashion, taxpayers would have 
little to be worried about when it comes to risk corridors. 
But, while the administration has paid lip service to the risk 
corridor program being budget neutral, it has also indicated 
that ``regardless of payments and receipts, HHS will remit 
payments as required under section 1342 of the Affordable Care 
Act,'' opening the door to what would essentially be a 
taxpayer-funded bailout of health insurers.
    Additionally, according to the Congressional Research 
Service, and a plain reading of section 1342, the law does not 
provide an appropriation for these payments. In the absence of 
a Congressional appropriation, any payments are clearly an end-
run around Congress, and, therefore, illegal.
    The very idea of risk corridors assumes that there will be 
``winners'' in the insurance industry, whose gains can be 
shifted to the ``losers.'' However, the President's decision to 
selectively enforce provisions of the ACA, along with higher 
enrollment of older and sicker individuals than was originally 
projected, could cause industry-wide losses--putting the 
taxpayer on the hook for billions in payments.
    The committee will consider legislation today to protect 
taxpayers dollars from being unlawfully given to health 
insurance companies under the risk corridor program.
    Second, as we've noted in previous hearings, the President 
promised numerous times that if you liked your health care plan 
you could keep it. However, millions of Americans experienced 
plan cancellations in the individual market last fall, and 
millions more will likely lose their employer-sponsored plans 
in the future.
    Dr. Cassidy's commonsense bill, H.R. 3522, the Employee 
Health Care Protection Act, would permanently grandfather all 
group plans issued by health insurers that were in existence in 
2013, allowing consumers to keep the coverage they like and 
giving small businesses better options than ACA-compliant 
plans.
    I thank all of our witnesses for being here today to 
discuss these issues, and I yield the balance of my time.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman.
    I want to reiterate what I said an hour earlier, and that 
is that we have, I guess, two bills that are the subject of a 
hearing today and one of them, H.R. 3522, the Employee 
Healthcare Protection Act, is already designated or noticed for 
the full committee markup on Wednesday without even having been 
marked up in subcommittee. So, once again, I do want to object 
to the fact--I know this isn't an issue where we can stop the 
hearing, but I do want to object to the fact that we are 
proceeding to mark up that bill in full committee without 
regular order and having a subcommittee markup based on what 
has been noticed.
    But beyond that, today's hearing is nothing more than 
another episode in a series of Republican attacks on the 
Affordable Care Act and this time, it is even harder to take 
seriously the words the GOP have chosen to include in the title 
include illegal bailouts. It is quite ironic, that, because the 
provisions of the ACA that are being attacked today are the 
very same policies Republicans have supported in the past.
    Of course, no one is surprised, since the passage of the 
ACA, Republicans have reversed course on so many ideas that 
were once the foundation of their health agenda. Remember that 
the individual mandate, that was a Republican idea as well. And 
as we get close to the election, we are going to hear more and 
more about how the ACA must be repealed and replaced, but I am 
still waiting for the alternative and I haven't heard one from 
the other side of the aisle. Risk corridors specifically are 
not some made up policy the Democrats decided to use to give a 
handout to insurance companies. Trust me, no Democrat is 
interested in bailing out the insurance company. But these 
policies are in place for legitimate reason and only because 
they are in the ACA are they controversial and considered in 
this negative light by the GOP.
    And let's recap the importance of risk corridors in order 
for insurance pools to keep premiums stable and costs low, it 
is critical to spread out risk. These types of risk-sharing 
mechanisms are not a new phenomena. They are used in all types 
of function insurance system. One great example is the use in 
the Medicare Part D program. In fact, the provisions of the ACA 
were modelled after the Part D program, which, of course, was 
authored by the GOP. If Republicans had their way, they would 
repeal this program and would effectively create chaos in the 
marketplace.
    So, Mr. Chairman, there is a new study, published in the 
New England Journal of Medicine last week, that estimated that 
10.3 million uninsured adults gained healthcare coverage 
following the first open enrollment period in the health 
insurance marketplace. The uninsured rate for adults ages 18 to 
64 fell from 21 percent in September 2013 to 16.3 percent in 
April 2014. And these results do not include the more than 3 
million young adults who gained health insurance coverage 
through their parents' plan. So we have done something pretty 
remarkable here with the ACA. These millions of people aren't 
just a number. They are actual people who can now see a doctor. 
They can now treat an illness that was otherwise going 
untreated or better yet, they can remain healthy and prevent 
illness in the future. Women no longer will be charged more men 
for insurance. Insurance companies must offer robust health 
coverage, so that when you do get sick or you are hospitalized, 
you aren't left with thousands of dollars in debt. If 
Republicans had their way, we would go back to the days when 
insurance companies could drop someone for a preexisting 
condition.
    Almost all of the ACA's key reforms and policies are now in 
place, and the Affordable Care Act is working. It is not 
perfect, but gutting the law's insurance provisions is not a 
way to perfect it. It is a way to score political points. So I 
am going to urge my Republican colleagues one more time to stop 
their political stunts, stop trying to dismantle the ACA's 
success, and come together with Democrats to strengthen and 
improve its historic benefits and protections. Am I going to 
yield to any of my colleagues, or--did you want some time?
    I will yield to the gentleman from Texas, Mr. Green.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman.
    And thank my ranking member for the time. I was hoping, 
over the last few months, we had a kind of vacation from 
efforts to attack the Affordable Care Act, and we were actually 
legislating and doing things I think our committee could work 
across party lines. These bills today it seems like it is--we 
are back to the, you know, how many times do we need to try to 
repeal the Affordable Care Act? I know it is probably 50 or so. 
But, you know, maybe it is just election fodder that we need to 
have. But I don't mind. There is a lot of successes over the 
last few months because of the Affordable Care Act, and we are 
seeing it every day. And I would hope us not to throw a 
roadblock up in front of it.
    And I appreciate you yielding me your time.
    Mr. Pallone. Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    I now recognize the ranking member of the full committee, 
Mr. Waxman, 5 minutes for an opening statement.

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

    Mr. Waxman. Thank you very much, Mr. Chairman.
    We have three bills before us today. We have a hearing on 
them. But all three bills are intended to undermine the 
Affordable Care Act. That is exactly what they would do. And I 
just want to point out that we have had over 50 votes on the 
House floor to repeal or undermine, effectively repealing, the 
Affordable Care Act. Don't we have anything better to do?
    We were promised by the Republicans that they would come up 
with a replacement, and they were going to do that in 2011. 
Then we heard it would come in 2012. Then it was sometime in 
2013. Then it was supposed to be early 2014. And then we were 
assured there would be a vote this summer. Well, then it was 
the fall. And now we hear we may not see a replacement until 
2015 or 2017.
    It is clear to me that they don't have any productive ideas 
of their own to offer. It appears that they have decided to add 
to their 50 votes to repeal or undermine the ACA. They 
certainly are working hard to secure their place in history as 
the least productive Congress in the history of this Nation. I 
oppose all three of these bills before us today. The first 
bill, H.R. 3522, says that any group health insurance plan on 
the market in 2013 can be sold in perpetuity. They don't have 
to change it. Now, they wouldn't have to adopt all of the key 
protections for consumers in the Affordable Care Act, 
protections that went into place this year, such as a ban on 
annual limits. Insurance companies used to do that. They put a 
limit at how much you can spend each year, and then after that 
limit, you pay for it all. Well, they want to go back and 
continue those plans that have those limits. They want to 
continue to allow plans that would charge a small business a 
higher premium because an employee has a preexisting condition.
    Those were changes we intended to make and did make in the 
Affordable Care Act. We said, if you want to keep your plan, 
you could keep it and we provided for grandfathering in 
existing individual insurance plans that were for sale when the 
law passed. And if they liked that coverage, they could keep 
it, even though that insurance might be inadequate by not 
covering all of the things that were required under the 
Affordable Care Act. And earlier this year, the President went 
a step further and said, well, if a small business had changed 
plans or purchased a new plan after the law passed, they could 
keep that new coverage unchanged into 2016.
    Now, that is supposed to be going into the affordable care 
options and choosing an insurance plan that protects the 
consumers and that is offering a rate consistent with 
competition by other insurance plans that have to meet all of 
those protections.
    The other two bills before us today relate to a premium 
stabilization program in the ACA, known as risk corridors. This 
is modelled after a nearly identical program in Medicare Part D 
that redistributes a portion of profits and losses between 
insurance companies. This was drafted by the Republicans on 
this committee as part of their Part D legislation. They and 
the Bush administration praised it repeatedly. It helped keep 
Part D premiums stable, and it has saved taxpayers money. But 
now that it is being used by the plans under the Affordable 
Care Act, oh, we can't continue these risk corridors. Let's 
repeal them.
    Before the administration announced that they would 
implement the risk corridors in a budget-neutral fashion, the 
CBO said that program would save taxpayers $8 billion in just 3 
years. The provision in the law makes sense. It will keep 
premiums stable. We should not repeal it or tie the 
administration's hands in implementing it.
    Well, Mr. Chairman, I think what we are seeing is more 
politics. Maybe it is the stuff that saves you in primaries 
from the extremists and the so-called Tea Party voters, or 
whatever. But we ought to do something worthwhile in this 
committee instead of passing bills that just undermine the ACA. 
It is working finally. Millions of people now have insurance. 
We ought to leave it alone. If it ain't broke, don't fix it.
    Mr. Pitts. The gentleman's time is expired. The chairman 
thanks the gentleman.
    As usual, all members' written opening statements will be 
made part of the record.
    I ask unanimous consent to insert the following into the 
record, a memo from the Congressional Research Service to the 
committee, an article from the L.A. Times, and an article from 
Bloomberg BNA.
    Without objection, so ordered.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    
    Mr. Pitts. On our panel today, we have three witnesses.
    Let me introduce them in the order that they will testify. 
First, Dr. Stan Veuger, Resident Scholar, American Enterprise 
Institute; Dr. John Hoadley, Research Professor, Georgetown 
University; and Mr. Edmund Haislmaier, Senior Research Fellow 
at the Heritage Foundation.
    Thank you very much for coming. We appreciate your time 
very much. Your written statements will be made a part of 
record. You will each have 5 minutes to summarize your 
testimony.
    And Mr. Veuger, we will start with you. You are recognized 
for 5 minutes for your opening statement.

     STATEMENTS OF STAN VEUGER, RESIDENT SCHOLAR, AMERICAN 
    ENTERPRISE INSTITUTE; JACK HOADLEY, RESEARCH PROFESSOR, 
    GEORGETOWN UNIVERSITY; AND EDMUND F. HAISLMAIER, SENIOR 
            RESEARCH FELLOW, THE HERITAGE FOUNDATION

                    STATEMENT OF STAN VEUGER

    Mr. Veuger. Mr. Chairman, Mr. Ranking Member, members of 
the committee, first of all, I would like to thank you for 
giving me the opportunity today to discuss health insurance 
plan cancellations and material changes pursuant to the Patient 
Protection and Affordable Care Act.
    When Obamacare became law 4 years ago, a central claim made 
by proponents of this--informative insurance reform was not 
just, it would make some better off through redistribution of 
resources and more stringent regulation, but would do so 
without harming others, except perhaps through new forms of 
income and capital taxation. This claim was presented to the 
public by President Obama, by many other prominent Members of 
the Democratic party, by the full committee's ranking member 
just now, in colloquial terms, such as, if you like your plan, 
you can keep it; if you like your doctor, you can keep him, 
period. The problem with that promise was that it is not true, 
and I will discuss a few of the sort of more salient 
consequences of the legislation that undermine the veracity of 
that claim.
    Upfront in a certain sense, no one has been able to keep 
its 2010 plan, even if he or she liked it. Health insurance 
policies are no longer allowed to contain limits on lifetime 
reimbursements, for example. That may be a popular provision, 
but of course, it drives up the cost of health insurance 
policies. To say, in a very narrow sense, the claim ``you could 
keep your plan if you liked it'' is completely false.
    More central to the discussion today, I think, are plans 
that have incorporated some of the sort of more popular 
provisions, you know, a ban on adjusting for preexisting 
conditions, or the lifetime reimbursements, the annual limits, 
but it is about mostly the plans that are still being used and 
paid for.
    First, what I want to note is, by now, I think everyone 
realizes that in the individual market, millions of people who 
started out buying insurance there received cancellation 
notices announcing the ends of their current plans last year, 
and it may well be as many as 9 million people end up losing 
the plans they had before the Affordable Care Act passed.
    It doesn't stop there, though. A much larger group of 
Americans enjoy employer-based health insurance, a total of 
about 170 million people. And many of those plans will change 
or disappear as well. Of these plans, there are about--of these 
covered workers, about 18 percent were for firms that were 
smaller than 50 employees and will not be subject to the 
employer mandate to purchase health insurance when it kicks in, 
if it ever kicks in. In total, there is about 35 to 40 million 
covered workers who work for firms with fewer than 100 
employees. They are in so-called small groups plans. The 
remaining 130 to 135 million covered workers work for larger 
employers, and many of those self-insure.
    All of those plans are affected in different ways by the 
new Obamacare regulations. The most obvious way in which that 
happens is very similar to what happened in the individual 
market. Many fully insured plans that have changed a little bit 
since the law was passed no longer enjoy grandfather status, 
and so the firms that used to offer them will now be forced to 
purchase plans that are subject to new requirements regarding 
benefits and premiums. The plan covers some 30 million workers 
in the small group market, about 75 percent of workers in 
medium-sized firms, and some 20 percent of large firms. In 
total that is about 45, 50 million people. How large a change 
is introduced here is hard to assess on an aggregate basis 
because all of these plans are different, and it is unclear to 
what extent they will be materially affected by the new 
requirements.
    What we do know, as I said, is that there are--only very 
few plans are shielded from new rules and regulations due to 
their grandfathered status. There are other less direct reasons 
why, even in large firms that self-insure, workers will be 
affected. For example, even at those firms, the cost of plans 
will increase due to new taxes like the reinsurance fee, and 
the Cadillac tax when that arrives. So even though when 
millions of people receive their cancellation notices from the 
individual market, the administration claims that that will be 
it, you know; it is a small, tiny portion of the population, 
and everyone else is shielded. That is certainly not true, and 
there will be dozens of millions, if not more, people who will 
see their plans change whether they like it or not. Thank you.
    Mr. Pitts. The Chair thanks the gentleman.
    [The prepared statement of Mr. Veuger follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. Now the Chair recognize Dr. Hoadley 5 minutes 
for an opening statement.

                   STATEMENT OF JACK HOADLEY

    Mr. Hoadley. Thank you, Mr. Chairman. Thank you, Ranking 
Member, members of the committee.
    My name is Jack Hoadley I am a research professor at 
Georgetown University's Health Policy Institute, and I do 
appreciate the opportunity to speak to the committee on issues 
relating to risk corridors in the Affordable Care Act. There 
have been two times in recent history when Congress has 
introduced new health insurance programs.
    In 2003, the Medicare Modernization Act created the 
Medicare Part D prescription drug program. In 2010, the 
Affordable Care Act created the program of health insurance 
exchanges that operates as part of a broader initiative to 
extend health insurance coverage. In both cases, Congress was 
building a new kind of insurance program not previously in 
operation. Also, in both cases, policymakers were uncertain 
about how many plans would choose to participate in the new 
program and how many Americans would sign up for coverage 
offered by these plans. Specifically, policymakers were 
concerned that plans would be less likely to participate when 
they were unsure of how many enrollees they might attract and 
of the health status of the enrollees that they did obtain. If 
the plans did participate, they would likely set higher 
premiums to reflect these uncertainties.
    To address these uncertainties the Congress in both the 
Medicare Modernization Act and the Affordable Care Act included 
a set of risk mitigation measures, risk adjustment, 
reinsurance, and risk corridors, sometimes called the 3Rs. 
These measures were designed to help the new markets run more 
predictably, by encouraging entry of insurers in the new 
insurance markets and stabilizing premiums as the programs got 
started.
    Here is a quick review of the 3Rs. Risk adjustment is a way 
to adjust payments to plans based on the health status of the 
individual enrollees of each plan. The idea is to make sure 
plans and their enrollees are not penalized if enrollees are 
sicker than average or rewarded if healthier than an average 
enrollees coming into the program. Effective risk adjustment 
also deters plans from trying to avoid being chosen by people 
with more health risk.
    Reinsurance is a means of insuring the insurers by 
providing extra payments of an excessive number of their 
enrollees incurring usually high cost, such as having more 
accidents, or more cancer diagnoses than the average plan. As 
with risk adjustment, the intent is to make sure plans are not 
penalized or rewarded based on how many high-class people they 
enroll and reduce incentives to avoid high-cost individuals.
    Risk corridors, sometimes referred to as risk sharing, 
involves creation of a fund so that plans with unusually high 
gains pay back some of those gains and those with unusually 
high losses are partially compensated. The idea is to keep 
premiums affordable and to reduce the risk base by plans during 
the first years of a program, as the plans learn from 
experience about how to price themselves accurately.
    The risk corridors in both programs are designed on a two-
sided basis to limit both health plan losses and gains. If 
plans underestimate cost, they receive payments from the 
Government to reduce but not eliminate the loss. If they 
overestimate cost, they make payments to the Government to 
reduce, but again, not to eliminate the gain. Thus, all plans 
maintain a share of the risk for any losses and retain an 
incentive to set premiums as accurately as possible.
    These risk mitigation measures have been in use for Part D 
for 9 years now. So have they worked in Part D where we have 
had time to look at the data? The best measure of their success 
is that participation by both health plans and Medicare 
beneficiaries is still robust in the program's ninth year and 
the program is popular with both plans and enrollees. Among the 
stand-alone Part D plans in 2011, risk adjustment scores range 
from 72 percent to 146 percent of the average plan score. 
Without risk adjustment, the plans at the high end would have 
either suffered significant loses or been forced to charge much 
higher premiums. The opposite would have been true on the low 
end.
    Reinsurance payments for Part D plans averaged about $40 
per member per month in 2012. As such, they helped discourage 
plans from trying to avoid enrollees with unusually high drug 
costs.
    In contrast to the idea that risk corridors are bailing out 
plans, the experience of Part D suggests they have actually 
protected taxpayers. In each of the program's first 7 years, 
plans made net payments back to the Government as a result of 
greater profits than expected from their bids as opposed to 
receiving payments from the Government. In 2012, the most 
recent year for which data are available, Part D plans paid a 
total of $1.1 billion back to the Government. And in 2012, 
three-fourths of all Part D plan sponsors made payments back to 
the Government. In fact, and perhaps contrary to what some 
expected, the risk corridors in Part D have been protecting the 
Government from excessive profits by health plans as opposed to 
protecting health plans against pricing too low.
    The 3Rs continue to operate in Part D. In the Affordable 
Care Act, two of them risk corridors and reinsurance, are 
designed as short-term measures that will go away after 2016. 
Although one could argue that the role of risk corridors in 
reinsurance could be reduced or eliminated in Part D after 9 
years, we can make a good case for the significant role they 
have played in establishing a functional, sustainable, and 
robust market. The Part D experience also demonstrates that 
risk corridors protect the program from uncertainly both in the 
first years and beyond.
    Mr. Pitts. The Chair thanks the gentleman.
    [The prepared statement of Mr. Hoadley follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
        
    Mr. Pitts. Now the Chair recognizes Mr. Haislmaier, 5 
minutes for an opening statement.

               STATEMENT OF EDMUND F. HAISLMAIER

    Mr. Haislmaier. Thank you, Mr. Chairman.
    My name is Edmund Haislmaier. I am a senior research fellow 
in health policy at the Heritage Foundation, and thank you for 
the opportunity to testify before you and the committee today. 
The comments are my own and not reflecting any institutional 
position.
    As I addressed in my prepared testimony, I think what we 
need to do is step back for a minute and look at these three 
programs, and understand that these are different tools for 
different purposes. If you have a mechanic or a builder who is 
doing work for you, they are going to have a toolbox full of 
things, you know, hammer, screw driver, pliers. They will use 
different tools depending on what the job is. And so I would 
like to follow up on Dr. Hoadley's comments by simply 
clarifying for the committee what I see as the different tasks 
that each of these three are designed to address.
    The reinsurance provision is essentially designed to 
address the kind of risk that we might call market selection 
risk. In other words, you have a choice between markets. This 
is true of people who are insured and uninsured. I won't go 
into great length, but suffice it to say that it is premised on 
the idea that the way this legislation is designed and works, 
there is an expectation that more people in poorer health 
status will gravitate towards this market, and therefore, it 
taxes the existing market, principally the employer market, and 
transfers the funds to subsidize the new individual or the 
expanded individual market on that market selection risk 
expectation.
    The second program, risk adjustment is, as Dr. Hoadley 
pointed out, really about individual selection risk. I mean, 
everything could be fine with the market otherwise, but we 
still don't know when people have the ability to pick and 
choose a plan, as all of you do, in the Federal employee 
program, who is going to pick what kind of coverage. There are 
a lot of things that might influence people's decision, and the 
concern is, you don't want insurers to try to avoid people who 
are sicker and whatnot. So there is a risk adjustment 
mechanism. This is not new. This is, as Dr. Hoadley points out, 
has been around before elsewhere.
    The third, and the one that is the subject really of your 
hearing, is the risk corridor program. And the question that I 
would ask is, well, what is the risk that this is designed to 
address? Because it was observed that this was designed to hold 
down premiums. Well, no, it is not really designed to hold down 
premiums, necessarily. It is not designed to make the market 
balance out. It is not designed to spread the risk evenly 
across the market. That is what the other two are there for. 
What is this one here for? Well, this is a profit and loss 
risk. This is saying we don't know, and neither do you, the 
insurers, what the real price for this product is going to be, 
and we could be--and we are paying for most of it, and that was 
the significance of Part D--they were paying for three-quarters 
of it. We and you could be wildly off the mark. So what they do 
is the Government, which is paying three-quarters of it, in 
effect, has a profit and loss sharing arrangement through risk 
corridors with the insurers.
    Now, did that make sense in Part D? I think it did. Why? 
Because it was an entirely new product, providing comprehensive 
prescription drug coverage on a standalone basis had not been 
done before. There was no really relevant or suitable example 
for insurers to work off of, because yes, there was 
prescription drug coverage in the employer group market but 
that was integrated. It wasn't standalone, and non-elderly 
people consume drugs at one-fifth the rate that elderly do. So 
there was a lot of uncertainty surrounding that.
    Now, when we look at this, Dr. Hoadley is right, that was a 
new program, but my point is, Part D was also a new product. 
When we look at this, we see that it is a new program, but the 
product is a very old one. It is just being tweaked. So, at the 
end of the day, I am not sure that there is really a rationale 
for this kind of profit and loss sharing, when in fact, it is 
not hard for the insurers to get within a tolerable rate.
    Finally, I would point out that given that the transfer of 
funds that is going on in the reinsurance program is more than 
adequate to cover even some very egregious over-underestimation 
of premiums. If you look at the magnitude of the funds being 
transferred relative to the size of the market, you are looking 
at a market that, in 2014, was $28 billion and you are going to 
dump another $10 billion potentially into it in 2014 in 
reinsurance programs. That is a huge amount of money relative 
to the size of the market, even if you assume that the PPACA 
doubles that market, it is still pretty substantial.
    So I think that those programs, the other two programs, are 
more than adequate for the risks that are in the new program, 
and that it really isn't necessary to have the risk corridor 
program. Thank you.
    Mr. Pitts. The Chair thanks the gentleman and thanks all of 
the witnesses for their testimony.
    [The prepared statement of Mr. Haislmaier follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. I will begin the questioning, and recognize 
myself 5 minutes for that purpose.
    Mr. Haislmaier, should taxpayers be concerned that they 
will be liable for some insurance company losses under the ACA 
risk corridor program, and please explain?
    Mr. Haislmaier. Well, the issue, Mr. Chairman, is that, 
unlike the risk reinsurance program, which is a definitive set 
amount of money, or the risk transfer program, which is 
required to operate on a neutral basis, meaning it doesn't 
spend more than it takes in or it doesn't transfer more than it 
takes in, this program is not explicitly required to operate on 
that basis, and therefore, yes, that is a concern that the 
taxpayers should have.
    Mr. Pitts. The Congressional Research Services, American 
Law Division, issued a memo questioning the ability of the 
administration to make payments under the risk corridor program 
for lack of quote, ``valid appropriation,'' end quote. Now, 
since it is Congress' job to make law and the President's job 
to implement law, and if the law needs to be changed, it is our 
job to change it, not his. Given that the administration has 
tried to rewrite the healthcare law over dozens of times 
through regulations and Executive Orders, and delays, and so 
forth, should taxpayers be concerned that the administration 
will once again ignore the rule of law to prop up the 
President's healthcare law?
    Mr. Haislmaier. Well, I think the administration has taken 
different positions at different times on this particular 
provision. I believe at one point, they said they would operate 
on a budget-neutral basis, and then said they wouldn't. So yes, 
if there is ambiguity then, yes, Mr. Chairman, you know, that 
is Congress' job to clarify the ambiguity.
    Mr. Pitts. Thank you.
    Dr. Veuger, at the end of 2013, millions of Americans 
received notices from health insurers that they would be unable 
to renew their health coverage under the ACA. Many supporters 
of the law implied that this problem was restricted only to the 
individual market and would not affect employer-sponsored 
coverage. Would you clarify for us whether American workers 
could be subject to nonrenewals by employer-sponsored plans, 
often known as plan cancellations, under the Affordable Care 
Act?
    Mr. Veuger. Thank you, Mr. Chairman, yes. Many American 
workers will indeed be subject to nonrenewals, as I described 
with a bit more detail in my written testimony. There will be 
tens of millions of workers in small group plans that will see 
those plans being phased out, as very few of them, actually, 
will continue to have grandfather status by the time the 
employer mandate kicks in.
    The administration sort of mid-range estimate was that, by 
2016, 88 percent of all insurance small employer plans will 
have lost grandfather status, so all of those plans would in 
principle receive the same treatment that individual market 
plans received last year. So they will be canceled. The process 
would go through the employer, not the individual, so it may be 
slightly less salient, but it would certainly be the same fate 
that so many plans in the individual market had. And I find it 
surprising, honestly, that so many supporters of the law after 
being caught not being able to live up to the, ``if you like 
your plan, you can keep your plan'' promise on the individual 
side decided to continue with the same story for these plans 
that will ultimately suffer the same fate.
    Mr. Pitts. Some advocates of the ACA said they were 
surprised about the plan cancellation issue at the end of 2013. 
Wasn't a central feature of the ACA to impose Federal 
requirements that many plans simply did not meet? So should 
anyone have been surprised about the plan cancellation issues 
on the ACA?
    Mr. Veuger. Certainly not, because, to some extent, beyond 
a lot of income redistribution, one of the central goals of the 
legislation was precisely to impose new requirements on as many 
plans as possible. Some of those requirements are very popular 
among the general public. Some of the community rating 
features, for example, much less so. But it was definitely 
always the intention of the imposed new rules and regulations, 
and to some extent, it shows how insincere the promise was.
    Mr. Pitts. My time is expired. The Chair now recognizes the 
ranking member, Mr. Pallone 5 minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman.
    I wanted to say at the outset that risk corridors are 
mechanisms used in all kinds of insurance systems, and this 
wouldn't even be controversial if it wasn't part of the ACA. So 
it just bothers me that any time anything that is part of the 
ACA, no matter how normal it is, it just becomes controversial 
in an effort by the Republicans to destroy the ACA.
    The driving principle behind the risk corridor bills we are 
considering today is that they will cost taxpayers more or cost 
taxpayers money. Republicans don't have any evidence though 
that this will happen, but they figure if they can scream 
``bailout'' enough times, it must just seem true. But the 
Congressional Budget Office and the experience of Part D show 
just how silly the claims are. When the Congressional Budget 
Office looked at risk corridors recently, they said the 
collections from insurers would be $8 billion greater than 
payouts from the Government. And that means that the program 
would save taxpayers $8 billion in just 3 years, and that is 
not even counting the savings on premiums and premium tax 
credits. The administration has since made clear that they will 
implement the program in a budget-neutral fashion, and CBO has 
since confirmed that the program will be budget neutral.
    So I just want to ask Dr. Hoadley, were there concerns that 
the Medicare Part D risk corridors would cost taxpayers money, 
and what can you tell us about their actual impact on 
taxpayers? And what does that tell us about the impact of the 
ACA risk corridors?
    Mr. Hoadley. The experience in Part D, I think when the law 
was originally drafted, it was done as a symmetric kind of 
thing. If the ability of plans to estimate premiums accurately 
could be wrong in either direction, the experience in fact, as 
I mentioned in my testimony, is that every single year for 
which we now have data, which is the first 7 years of the 
program, plans have actually paid--made payments back to the 
Government. And I think if you add up all of those figures 
across the 7 years, we are talking about a total of about $8 
billion that have been made from plans back to the Government. 
So it really has represented a protection to the taxpayer in 
the way it has played out in Part D.
    Mr. Pallone. And again, you know, that is why I think this 
Republican bailout argument is just flat wrong, and it is a 
waste of this committee's time. And the Republicans just don't 
have the facts on their side.
    Dr. Hoadley, the ACA and the Medicare Part D both have risk 
corridor programs. They seem very similar to me, but again, my 
Republican friends seem to hate the ACA program and love the 
Part D program, which seems so inconsistent. They claim that 
the ACA risk corridors are a bailout, but the Part D risk 
corridors have actually made the Government money, and they are 
more generous to insurers than the ACA program is. And of 
course, the Part D risk corridors are permanent; whereas the 
ACA risk corridors will only last for 3 years. I mean, all of 
this, again, to the point that this is something that would not 
be controversial at all if it wasn't part of the ACA.
    Can you say more about the similarities and differences 
between the ACA and the Part D risk corridors, and are these 
programs fundamentally different?
    Mr. Hoadley. No, I think you have really highlighted the 
different ways in which they are similar. The biggest 
difference probably is that the risk corridor program in the 
ACA is time limited, and it is only designed to operate for 3 
years. And Part D, it was set up for an initial--I think, it 
was 3 years at a fairly broad corridor, then it was tightened 
down to be a little bit of a narrower corridor for the next 3 
years, and then CMS has had the authority to eliminate the risk 
corridors after 6 years, but has chosen to keep them in 
operation; felt that they were still proving a value, and you 
can kind of see the value even potentially right now with some 
of the uncertainties around some of the new drugs that are on 
the market. And it is that kind of uncertainty that those risk 
corridors are designed to do.
    The same system really applies in the ACA. As long as we 
have a lot of uncertainty about how the program might operate, 
there is an interest in protecting, in both directions, 
protecting the Government from errors made in one direction in 
setting premiums, protect the plans in the other direction if 
that is the way it works out.
    Mr. Pallone. Yes, the Republicans claim that the ACA risk 
corridors are not just bad policy; they say they are illegal. 
And I suppose it is not a surprise, since they are currently 
wasting taxpayer dollars to sue the President, and they seem to 
have designs on impeaching him as well. The Department of 
Health and Human Services has provided the committee with 
specific answers to questions about its legal authority to 
implement the risk corridor program. The law authorizes the 
collection and payment of user fees to and from health insurers 
to operate the risk corridor program that aligns with OMB and 
GAO guidance. Bottom line is, the ACA is the law of the land, 
and this should not be a controversial program, Mr. Chairman.
    Mr. Pitts. The gentleman's time is expired. The Chair 
thanks the gentleman.
    I now recognize the gentleman from New Jersey, Mr. Lance 5 
minutes for questions.
    Mr. Lance. Thank you very much, Mr. Chairman.
    I am the sponsor of the legislation to repeal risk 
corridors, and I do this because I believe it is bad public 
policy. And I certainly do not do it as a matter of some sort 
of intellectual exercise. And I am deeply concerned about it.
    Mr. Haislmaier, would you go into a little greater detail 
as to why you believe there is a difference between this 
program and the program designed roughly a decade ago for 
Medicare Part D.
    Mr. Haislmaier. Well, essentially, the risk corridor 
program is a deal between the Government and the insurer that 
says we share the profits and we share the losses. It is, you 
know, you see commercial deals like that between two parties 
all the time as a joint venture. The question in my mind is, is 
that appropriate in each of these cases? I think a stronger 
argument can be made that that is appropriate in the case of 
Medicare Part D than can be made here. And I base it on the 
following: In Medicare Part D, the insurers were being asked to 
do something they had never done before in a market they didn't 
understand, with a totally new product. It was not only a new 
market; it was a new product. The customers had never bought 
anything like that, et cetera. That is a very different world 
than the world in which these were applied in the PPACA, where 
you essentially are making some adjustments to a market that 
has been around for decades, the individual coverage market, 
and yes, the Government is adding some subsidies for some 
people to that. But this really isn't a huge departure from 
business that the insurers have been in for years. And so the 
question is, should the taxpayer be at that point involved in 
profit and loss on that market, or is that just a normal level, 
albeit maybe somewhat elevated, but a normal level of profit 
and loss risk that private actors bear all the time? And I 
think that is the latter.
    Mr. Lance. Thank you.
    And certainly, I am willing to give the other panelists 
time to respond to my question.
    Dr. Hoadley.
    Mr. Hoadley. I mean, I would actually argue that the 
uncertainty in some ways was greater in the Affordable Care Act 
than in the health insurance marketplaces. In the Medicare Part 
D program, the insurance was over prescription drugs. People's 
use of prescription drugs from one time period to the next is 
rather stable, rather predictable in most cases, whereas the 
need for a broader health insurance is much more volatile.
    This was also a market in the ACA that was with some of the 
same questions we had in Part D: Who will enroll? Will the 
number of people we think will enroll, will that actually be 
the set of people? Will there be pent-up demand? Are there 
people who have been, in the case of Part D, you know, going 
without certain prescription drugs who are now going to start 
taking them? Are there people, in the ACA case, who have been 
going without treatment now who are going to come in for 
treatment? It is those kinds of uncertainties that make it hard 
for an insurance company to set premiums, and the value of 
having a reinsurance----
    Mr. Lance. My own view on that is that this is similar to 
what existed at a prior time. I suppose that is debatable. But 
it is only for a limited period of time, and there may be, if I 
am understanding what you are saying, a volatility for some 
time. I agree with what Mr. Haislmaier, has said. Obviously, 
significant legislation is to be debated, and I respect the 
views of all who are interested in it.
    I do want to assure the public that my sponsorship of this 
legislation is based upon my deeply held beliefs that risk 
corridors should not be permitted in this situation.
    Now, regarding the appropriations issue. Medicare Part D 
includes the risk corridor program, and it includes a source of 
funds for the program. But as I read the healthcare 
legislation, that is not the case. And based on a lack of 
appropriation, it is my legal judgment that the administration 
cannot make payments to cover insurance company losses under 
the risk corridor program. This issue is further explained by a 
recent memorandum compiled by the Congressional Research 
Service, and I would like to submit it for the record.
    Mr. Pitts. Without objection, so ordered.
    Mr. Lance. Thank you. I only have 15 seconds. Let me say 
that, in December, I asked the Secretary of Health and Human 
Services whether it was legal to make subsidies to the Federal 
exchanges as opposed to the State exchanges, and she did not 
answer the question. That is not the topic of discussion this 
afternoon, but we have now had a split in the circuits on that 
significant issue and I trust the Supreme Court of the United 
States will eventually address this issue. And I would hope 
that the courts might eventually address the fact that, in my 
judgment, there is a lack of statutory law to move forward with 
an appropriation that has not occurred regarding this risk 
corridor program.
    Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    I now recognize the gentleman from Texas, Mr. Green, 5 
minutes for questions.
    Mr. Green. Thank you, Mr. Chairman, and thank you for 
having this hearing.
    Dr. Hoadley, I know you have answered about the affordable 
care market and the senior prescription drug program. The ACA 
significantly reforms the individual insurance market so that 
the products insurers are offering in the marketplace are 
fundamentally different than they were sold before. Insurers 
can no longer discriminate based on preexisting conditions. 
They can no longer charge women more for the same coverage. And 
they can no longer offer what a lot of us would consider junk 
coverage that doesn't cover hospitalizations or disappears 
whenever consumers need it the most.
    Because of financial assistance the law makes available, 
tens of millions of new customers are entering the market for 
the first time, and this means that insurance has significant 
uncertainty when pricing for a market coverage in the early 
years of the ACA. Can you go into more detail about that the 
risk corridors are necessary in Part D and why they are also 
necessary for the Affordable Care Act?
    Mr. Hoadley. I mean, one of the things that I think is 
striking about the notion of a risk corridor, is that if it is 
not needed, if it turns out that plans are able to estimate 
their premiums pretty accurately, then no payments will need to 
be made. If a plan's experience is very similar to what their 
estimates, then there is no cost in either direction. In the 
case of the ACA, there is a 3 percent corridor around which 
plans are at full risk for going higher or lower, and if they 
stay within that estimate in either program, you know, they 
will be fine.
    I think the other point is that there is a learning 
process. You could make the argument that the risk corridors 
for the Part D program aren't needed anymore. We are well into 
that program, and they could be phased out. So far, CMS has 
chosen that there is legislative authority to make a decision 
for CMS to decide whether or not to extend that further. For 
the moment, that has been extended. In the case of the ACA, the 
decision was in the law, was to have it last just for the 3 
years.
    But there really are ways in both programs to try to 
protect both the taxpayer and the plans against the kind of 
uncertainty in setting premiums.
    Mr. Green. I would like to take the remainder of my time to 
highlight a report on the Medicare's Program Board of Trustees. 
It was just released today. In 2009, the trustees project that 
the Hospital Insurance Trust Fund would be unable to pay its 
bills in 2017, only 3 years from now. However, today's report 
now puts this date at 2030, 13 years later than that was 
projected. The report goes on to explain that this improvement 
is thanks to the part of the reforms in the Affordable Care 
Act.
    While today's report focuses on Medicare, it reflects 
broader trends in healthcare systems through a much slower 
growth costs through 2014. Over the 50 months since enactment 
of the Affordable Care Act, healthcare prices have risen at 
slower rate than any other comparable period in 50 years. There 
are many reports about the positive impact this law is having 
on coverage of the uninsured and underinsured, better benefits 
and lower growth in healthcare cost.
    And in my time left, Dr. Hoadley, would you comment on the 
ACA and that impact on Medicare?
    Mr. Hoadley. Yes, and I think you have hit the point very 
accurately. And one of the things that, you know, we can take 
from that lesson that has come out in today's trustees report 
is on that lower growth rate, is if that turns out to be true 
for the broader healthcare system as well, that is one of the 
reasons why plans may turn out making payments back to the 
Government under the risk corridor program in the ACA. So there 
is really a linkage between the savings that we are seeing in 
healthcare costs generally and the potential to protect the 
taxpayer by making sure the taxpayer benefits from that lower 
cost trend rather than that benefit going solely to the plans.
    Mr. Green. OK, I want to reiterate though that over the 50 
months since the enactment of the Affordable Care Act, health 
prices have risen at a slower rate than they have for the last 
50 years. Mr. Chairman, I am going to yield back my time, but I 
am hoping that we can actually work on legislation. If there 
are problems with the Affordable Care Act, let's fix it. Let's 
don't strangle it after we are seeing some of the success after 
only 50 months of the law.
    So I yield back my time.
    Mr. Pitts. The Chair thanks the gentleman.
    And now recognize the gentleman from Florida, Mr. 
Bilirakis, 5 minutes for questions.
    Mr. Bilirakis. Thank you. I appreciate it, Mr. Chairman.
    Mr. Haislmaier, under the recently issued regulations, any 
payment shortfall in year 1 would be made up in year 2 or 3. 
However, if by year 3, the receipts are less than total 
payments owed in the risk corridor, the administration has 
stated, and I quote, ``We will establish in new and future 
guidance or rulemaking how we will calculate risk corridors 
payments if risk corridors collections do not match risk 
corridors payments ... in the final year of the program.''
    Will extra funds come from taxpayer funds, in your opinion? 
Where is HHS going to find it?
    Mr. Haislmaier. Well, that is a good question. I don't know 
where they are going to find the money. It will either come out 
of--to the extent that they are able to, maybe transferring 
from some other accounts. There are some revenues that HHS 
receives directly into the operating account for user fees for 
like clinical laboratory user fees and things like that. So 
maybe they can make that. But you would have to ask them. I 
don't know where they will get the money.
    Mr. Bilirakis. OK, next question. When the rules for the 
risk corridor were published in 2011, the administration was 
willing to pay more in risk corridors than they collected. They 
have subsequently changed to a budget-neutral position. Is 
there anything in the law that prevents HHS from reinterpreting 
risk corridors, yet again, to not keep it budget neutral?
    Mr. Haislmaier. No, I mean, I think that is why you have 
this issue. There isn't anything that I can see in the law that 
prevents them, at least in the authorizing statute. There is an 
appropriations question, which I am not an expert on, but in 
the authorizing statute, they do not explicitly have to have 
this budget neutral in the authorizing statute.
    Mr. Bilirakis. Thank you. Does the President's healthcare 
law require HHS to pay the full risk corridor amount owed, 
regardless of any shortfall, yes or no?
    Mr. Haislmaier. I am sorry, I don't understand.
    Mr. Bilirakis. Let me repeat the question. I am sorry. Does 
the President's healthcare law require HHS to pay the full risk 
corridor amount owed regardless of any shortfall?
    Mr. Haislmaier. It could be interpreted that way, yes, sir.
    Mr. Bilirakis. Does the risk corridor incentivize plans to 
underbid their premiums as a means to capture insurance market 
share in your opinion?
    Mr. Haislmaier. Well, that would be one scenario whereby 
you could see losses in the program on balance, net losses in 
the program as if you had significant underbidding. And I think 
that the concern is that the administration's pressure on 
carriers to keep premiums down might lead to some of that 
underbidding, yes.
    Mr. Bilirakis. The administration has claimed that the risk 
corridor is nothing more than a user fee. In your opinion, is 
this program a user fee?
    Mr. Haislmaier. No, that is something different. A user fee 
is a different animal, and that is governed by a different 
statute that is already----
    Mr. Bilirakis. Define user fee.
    Mr. Haislmaier. A user fee is a fee charged for some 
service that the Government provides to the user that is not 
otherwise generally provided to the public, so the example 
which you all are probably most familiar with is when companies 
go before the Food and Drug Administration to get a drug or a 
device or something approved, you know, they are getting the 
benefit of that regulatory approval. I mean, it has certain 
benefits because they can say in court, Hey, it is FDA 
approved. So they charge a user fee.
    There is a general user fee statute on the books, that 
allows and encourages agencies to do that sort of thing. And 
that is how the Department of Health and Human Services has 
come up with funding for the federally facilitated exchange for 
which there is no operating funding. They are charging a user 
fee. It at 3.5 percent. But this does not, in my view--I am not 
an expert on that, but from what I can see, this doesn't seem 
to fit any of the criteria on the Federal user fee statute.
    Mr. Bilirakis. Yes, I tend to agree.
    Thank you, Mr. Chairman, I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    I now recognize the gentleman from Virginia, Mr. Griffith, 
5 minutes for questions.
    Mr. Griffith. Thank you, Mr. Chairman.
    I would say that when we talk about the rates on the 
Affordable Care Act, they may be growing, the insurance 
increases may be growing slower, they may be growing faster, we 
will have to see what happens this fall, but that certainly 
they are growing, and it is not the reduction that was promised 
when this bill was passed of $2,500 per family, per average 
family, in the United States. So it is yet another promise that 
was made that has not been kept by the Affordable Care Act.
    With that, Mr. Chairman, I would like to yield the 
remainder of my time to Dr. Cassidy of Louisiana.
    Mr. Cassidy. Thank you, Mr. Griffith.
    Several things to go over. First, the legal aspect of it. I 
noticed that Mr. Pallone mentioned that initially CBO estimated 
this would return $8 billion to the Treasury and then glossed 
over the fact that now it is not going to return money to the 
Treasury, but rather it will be, quote, ``budget-neutral,'' 
except as subject to appropriations, we don't know from whence 
they come. That is a far cry from being $8 billion to the 
Government.
    And CBO, in their writings, I will note, said that the 
reason that they initially called it $8 billion--because, Dr. 
Hoadley, as you mentioned, in the Medicare Part D, there were 
payments back. But as it turns out, not only is it, I guess, 
now not going to be money back to the Treasury, but I am told 
that before Mr. Issa's committee, it is now estimated that 
insurers are going to request over a billion dollars more than 
they anticipate paying into the program. So, far from returning 
$8 billion back, now they are going to require a billion 
dollars more, and it is not clear where that money comes from.
    And as regards the memo, the memo which supposedly HHS 
justifies with, it is interesting. They say that they are going 
to call this a fee, but in the President's budget he doesn't 
call this a fee. Additionally, it is also of interest that 
never in the legislation is this called a fee but now it is 
being called a fee, and a fee which goes into a revolving fund 
which is not being set up.
    So there is no subject of a revolving fund in the 
legislation, nor is there comment of a fee, but now we are 
being told that it is a fee going into a revolving fund that 
heretofore did not exist but has been manufactured through a 
legal opinion of HHS.
    Now, if the other side of the aisle is quite willing to do 
away with Congress' prerogative, prerogative both to 
appropriate and to designate what shall be a revolving fund, 
that shall be up to the other side of the aisle to do away with 
prerogative. I suppose that comes from being loyal to one's 
President. Shame, shame.
    However, I say I will be loyal to the Constitution and 
support the Lance-Cassidy bill, which requires an appropriation 
if this is to be the case and requires that there be a specific 
statutory authority for a revolving fund, which the ACA 
specifically does not include.
    Now, just for that kind of, you know, setting the record 
straight, if you will, let me just now conclude with another 
statement, if you will. And, again, going to the bill I am 
sponsoring, Mr. Veuger--did I pronounce that correctly? 
``Veuger''? I am sorry. Dr. V, I am sorry, Dr. V.
    You know, it is interesting, the President and my 
congressional colleagues promised many times over the debate of 
the healthcare law that if you like your health plan you can 
keep your health plan. This last year, 93,000 Louisianians in 
the individual markets lost the plan they had specifically 
because of Obamacare. Clearly the President's promise was, to 
put it euphemistically, inaccurate.
    Now, in order to provide relief to the individuals losing 
their health coverage, the House passed the Keep Your Health 
Plan Act, allowing plans available on the individual market 
before Obamacare to continue to be offered. The House must now 
act to provide the same relief to businesses and employees now 
by passing my bill, the Employee Health Care Protection Act, 
which would allow the millions of workers in the group market 
to keep the health plan they like. I thank the committee for 
conducting this plan.
    Again, I thank Mr. Lance, my colleague, for working with me 
to introduce the Lance-Cassidy risk-corridor bill. While it is 
important to allow risk-mitigation mechanisms for companies in 
the private market, it is important that we ask the 
administration to follow the Constitution.
    The administration has decided to once more ignore the law 
as written by Congress and make payments to insurance companies 
without congressional approval. The Lance-Cassidy bill ensures 
the risk-corridor program does not become a vehicle for 
ignoring the Constitution by the administration.
    With that, I thank my colleague, and I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    I now recognize the vice chairman of the full committee, 
Ms. Blackburn, 5 minutes for questions.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    I want to thank our witnesses for being here.
    And I thank the chairman for making time for us to have 
this hearing. And I am so pleased that Mr. Lance and Dr. 
Cassidy have brought this bill forward.
    You know, it is amazing to me, as we have lived through the 
legislative process for Obamacare and then the launch of 
Obamacare, the failed rollout of Obamacare, and now we get to 
the implementation and where the cost is going to be.
    And as Dr. Cassidy was mentioning, we now are hearing, 
well, it is not really a tax, this is going to be a fee; well, 
this fee is going to go to a fund. Well, it seems as if what 
they are doing is trying to convolute the issue to the point 
that all people know that their insurance cost is going up but 
they are not sure who to blame and how to blame.
    And I find it so interesting, one of the biggest complaints 
we get in our district is about insurance costs, access, narrow 
networks, and everything is costing more. And then people will 
say, ``And now we hear the insurance companies want you to bail 
them out. Don't you dare bail them out.''
    So if you were with me in my district, that is what you 
would hear. And much of it is based on the experience 
Tennesseeans had with a failed program called TennCare. And I 
know, Mr. Haislmaier, that you all at Heritage have looked at 
that program and the failings of TennCare and the reasons it 
did not work.
    And I know it thrills Mr. Pallone that I am sitting here 
and saying ``TennCare.'' He has probably grown weary of hearing 
me talk about the failure of that program.
    And, by the way, it was a Democrat Governor that took it 
down because it was too expensive to afford. It was one of the 
first examples of ``too expensive to afford.''
    So, Mr. Haislmaier, you know, who eventually pays all these 
taxes and fees? Our regulation taxes, our access fees, who 
eventually pays all of this?
    Mr. Haislmaier. Well, the consumer does, obviously----
    Mrs. Blackburn. Absolutely.
    Mr. Haislmaier [continuing]. Either directly when they 
purchase something or indirectly through their tax bill.
    Mrs. Blackburn. And do you have States that you are 
researching that are showing that their insurance cost to the 
consumer is going to be reduced $2,500 a consumer? Are you all 
finding this anywhere in your research?
    Mr. Haislmaier. My colleague published a paper, and we are 
going to be updating it now in 2015 with new data on this.
    As expected, the only States where you actually saw any 
measurable decrease in premiums were States that had already 
made a worse mess of their market before PPACA was enacted. So 
New York is the prime example. So when you have actually made 
things worse, I guess doing this is an improvement. But, by and 
large, everybody else was seeing increases.
    Mrs. Blackburn. Yes. I know in Tennessee we had had cost 
estimates from one of our large insurers of 18 percent. And, as 
you can imagine, on a weekend in Tennessee, where we are busy 
with festivals and farmers markets and out and about a good 
bit, people are not happy with that at all.
    Talk for just a minute on the record--Mr. Hoadley mentioned 
Medicare Part D, and I was here when we did the MMA. And I 
would like for you to talk for the record just a moment about 
the difference in the risk corridors for Medicare Part D and 
for PPACA.
    Mr. Haislmaier. You are asking me?
    Mrs. Blackburn. Yes.
    Mr. Haislmaier. Yes. Well, the mechanism is very similar. 
The issue that I pointed out is simply whether it was an 
appropriate thing, whether it was appropriate for the 
Government to, in effect, be underwriting profit or loss risk 
in this market, whereas one could make the case that, given 
that Medicare was a three-quarters Government-funded program, 
that it was a totally new venture, that the insurers wouldn't 
doing this if the Government wasn't asking them to do this, 
that you could make the case that underwriting the profit and 
loss risk through risk corridors might make some sense there. 
That is essentially the question.
    I think, really, frankly, the problem here is there are so 
many ways in this legislation where subsidies are hidden or 
things are done through the back door, there is so little trust 
of the administration in its actually implementing this 
legislation, that I think a lot of people are, with some degree 
of legitimacy, concerned that this could become another way for 
a back-door deal.
    I mean, look at how the legislation sets up additional 
payments to insurers for reducing the copays and deductibles 
for specific individuals. And that is not transparent, and it 
is not accountable. So I can see where the suspicion is coming 
from.
    I think the safest thing to do is you simply make it 
budget-neutral by statute, because there is ambiguity. And as 
Dr. Hoadley points out, you know, if it is needed, they will 
use it, and if it isn't, they won't.
    Mrs. Blackburn. Thank you.
    Yield back.
    Mr. Pitts. The Chair thanks the gentlelady.
    I now recognize the gentleman from Louisiana, Dr. Cassidy, 
5 minutes for questioning.
    Mr. Cassidy. Dr. V., now, go through once more how the ACA 
treats small businesses and workers differently than those who 
self-insure.
    Mr. Veuger. Small businesses that insure their employees 
buy plans from insurance companies, and they have to go into a 
marketplace and buy them. Larger companies that self-insure, 
well, as the term suggests, protect themselves from the risk 
that comes from----
    Mr. Cassidy. So they protect themselves from the risk; you 
imply that there is a risk of going into the regulated market. 
Your testimony emphasizes the increased cost that comes with 
going into the ACA-regulated market. Fair statement?
    Mr. Veuger. Well, there will be cost increases on both 
sides. If you are self-insuring, there will be cost increases 
under the Affordable Care Act, as well. There is a reinsurance 
fee, there is----
    Mr. Cassidy. There are the taxes, the trillion dollars in 
taxes----
    Mr. Veuger. Yes. For sure.
    Mr. Cassidy [continuing]. Coming with an individual policy.
    Mr. Veuger. Yes.
    Mr. Cassidy. But it seems, it strikes me that, in general, 
the cost increases under the mandated benefits, et cetera, in 
the non-ACA market, if you will----
    Mr. Veuger. Will be more limited.
    Mr. Cassidy. Yes.
    Mr. Veuger. Yes. I think that is fair.
    Mr. Cassidy. So, if you will, the cost increases will be 
greater upon the smaller employer, the one who is not self-
insuring.
    Mr. Veuger. I think that is certainly fair to say.
    Mr. Cassidy. So the smaller employer, who typically--let's 
face it, they are smaller, they are trying to get big--they are 
the ones getting hammered the most. Isn't that crazy?
    Mr. Veuger. Yes. Perhaps with the exception of microbrews 
that want to stay small for some reason, I think that is also 
fair to say.
    Mr. Cassidy. Yes. So, if you will, it is interesting, the 
CBO recently put out a study saying that they have lowered the 
cost of coverage because there will be wage reductions under 
Obamacare so, therefore, fewer will be on subsidies and more 
will be on Medicaid. You almost wonder if this was by design. 
Again, you don't have to comment on that. That was CBO 
reporting that.
    Mr. Haislmaier, one more time, can you tell us the amount 
of money which is available through the reinsurance program 
relative to the size of the market that is going to be in the 
exchanges?
    Mr. Haislmaier. The reinsurance program makes available as 
much as $10 billion this year. If it is not all used, it can be 
carried forward----
    Mr. Cassidy. Ten billion with a ``B.''
    Mr. Haislmaier. Ten billion with a ``B.'' The 2013, the 
aggregate premium for the individual major medical market was 
about $28 billion.
    Mr. Cassidy. So it is a $28 billion market, and you have a 
$10 billion subsidy already going.
    Mr. Haislmaier. Right. So, you know, if you make various 
assumptions about increased costs and increased enrollment, you 
know, OK, let's say you double that market, you know, you get a 
$40 billion, $50 billion market. That is if lots of people sign 
up and----
    Mr. Cassidy. So you have 20 percent of the potential loss--

    Mr. Haislmaier. Yes.
    Mr. Cassidy [continuing]. Already being covered just 
through the reinsurance----
    Mr. Haislmaier. Yes, that is my point, is if you are 
looking at a situation where there is this uncertainty--as Dr. 
Hoadley and I and others have pointed out, there is this 
uncertainty that insurers didn't know how many people and how 
sick they would be and things like that. My point is simply 
that there is an appropriation already in there. It is, in 
effect, designated to that market, because it is going to that 
individual----
    Mr. Cassidy. And it would actually be allocated in a 
constitutional fashion as opposed to pushing the envelope.
    Dr. V, I am sorry, I messed up. I didn't finish with my 
conclusion.
    Mr. Veuger. Uh-huh.
    Mr. Cassidy. If we are going to say that the problem with 
the ACA is that it disproportionally increases cost on smaller 
firms, the ones that we hope grow to be bigger firms, doesn't 
it seem a reasonable remedy that we allow them to keep their 
policy if they like? If it is cheaper for their bottom line, 
they can stay on the policy which they previously had; if not, 
they can go onto the regulated market.
    Mr. Veuger. I think there is certainly something to be said 
for that, especially given the promises that were made to them 
when this legislation was presented and when it was approved 
and when it hadn't been rolled out yet.
    Mr. Cassidy. Yes.
    Mr. Veuger. So, yes.
    Mr. Cassidy. So if only to ask the President to keep his 
word that you can keep your policy if you like it, that would 
be a reasonable way to go.
    Mr. Veuger. I think that is fair to say.
    Mr. Cassidy. Yes. OK.
    Well, I inefficiently asked my questions, so I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    I now recognize the gentleman from Georgia, Dr. Gingrey, 5 
minutes for questions.
    Mr. Gingrey. Mr. Chairman, thank you.
    Mr. Chairman, it is my understanding, in regard to some of 
the questions that the ranking member asked just a few minutes 
ago, that we actually invited the general counsel of Health and 
Human Services to be a witness at this hearing, maybe to 
address some of those issues, but that he declined the 
invitation to be part of the panel.
    Dr. Veuger, do you think that it should have been obvious 
to Members of Congress that many Americans who liked their 
healthcare plan would not be able to keep it under the 
Affordable Care Act?
    Mr. Veuger. Well, so it never really ended up becoming 
clear to me whether all Members of Congress had read the bill 
before they voted on it. And I think it is hard to--and, you 
know, it is a long document. Plus, there are all kinds of 
related regulations and rules. I would imagine that most of the 
people most closely involved in drafting the bill would have 
been aware and partially----
    Mr. Gingrey. Yes. Well, listen, let me interrupt you just 
for a second for a follow-up on that because it is a great 
segue, your comment.
    Under the Democratic majority in 2009 and 2010, there was 
no subcommittee markup of the House-passed version of PPACA, 
the Affordable Care Act. There was also no legislative hearing, 
no subcommittee markup or full committee markup of the Senate 
bill.
    Do you think that it was responsible for Washington 
Democrats to ignore regular order on something of this 
magnitude, the Affordable Care Act? And could it have helped 
Members realize that the law would end up leading to plan 
cancellations for millions of Americans if we had just followed 
regular order?
    Mr. Veuger. I think it is--I mean, in a sense, I think it 
was reasonable for them to do if they really wanted to pass 
this kind of legislation, which I think--I don't think it would 
have passed otherwise. If you are married to the idea of 
passing it, I think going through regular order would have kept 
you from doing that. So, in that sense, it is reasonable.
    Mr. Gingrey. Well, of course, as we all know, you know, the 
41st Senator from Massachusetts required them to invoke 
reconciliation, which was never done before, has never been 
done before or since, thank God.
    So, you know, if we had done things in the right way, 
whether every Member of Congress had read every single word, 
every single line, every single page of the 2,700-page bill, I 
think we would have been more likely to have gotten it right.
    Dr. Hoadley, based on the data that insurers have reported, 
health insurance companies in the exchange expect net payments 
through the risk-corridor program of a billion dollars from the 
American taxpayer.
    Isn't it true that, while both the Affordable Care Act and 
Medicare Part D program that you talked about in your testimony 
contain risk-corridor programs, that it is much more likely 
that taxpayers will have to pay for some insurance company 
losses under the Affordable Care Act risk-corridor program as 
compared to the Medicare Modernization and Prescription Drug 
Act of 10 years ago?
    Mr. Hoadley. I actually think it is too early to draw any 
such conclusion. The information that insurers, even 
themselves, have after just a few months of operation is far 
too short to really have realistic estimates of whether they 
are going to get payments back from the Government or make 
payments to the Government. I think it just remains to be seen.
    Mr. Gingrey. Well, you told us in your testimony, I think, 
that under the Medicare Modernization and Part D, the 
prescription drug risk-corridor program, that the taxpayers 
have essentially benefited--did you say to the tune of $8 
billion over a 10-year period?
    Mr. Hoadley. Over 7 years--I haven't done the exact 
arithmetic, but I think it is somewhere in the range of about 
$8 billion paid back to the Government over 7 years.
    Mr. Gingrey. But, as I say, it is predicted and reported by 
health insurance companies in the exchange, they expect that 
they will get net payments--that is, from the taxpayer--of at 
least a billion dollars.
    So, you know, I think it is very appropriate. This is a 
great legislative hearing and opportunity to talk about some of 
these bills that my colleagues, Representative Cassidy and 
Lance and others, have in regard to whether we eliminate this 
risk-corridor program or we modify it. Certainly, we need to do 
something about assuring that if you like your health insurance 
plan, you can keep it, period, no exceptions.
    So that bill to say that, yes, in the small group market 
and the individual market, those 2013 policies, the people that 
like them can keep them, that is a very appropriate 
legislation. And I hope that we will pass it in both the House 
and Senate and hope that President Obama will sign it into law.
    And I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    I now recognize the gentlelady from North Carolina, Mrs. 
Ellmers, 5 minutes for questions.
    Mrs. Ellmers. Thank you, Mr. Chairman.
    Dr. Hoadley, I want to go back to some of your testimony 
and the exchange you had with one of my colleagues from across 
the aisle on the differences between Medicare Part D and the 
Affordable Care Act.
    Is the Affordable Care Act something--is it mandatory or 
not mandatory?
    Mr. Hoadley. For people to sign up for insurance?
    Mrs. Ellmers. For people to sign up.
    Mr. Hoadley. There is an insurance mandate, yes.
    Mrs. Ellmers. It is a mandate. Is Medicare Part D a 
mandate?
    Mr. Hoadley. It does not have a mandate. It instead has a 
late-enrollment penalty that creates the incentive for people 
to sign up.
    Mrs. Ellmers. OK, but it is not a mandate. It is----
    Mr. Hoadley. Not a mandate.
    Mrs. Ellmers [continuing]. A personal choice that every 
individual, every senior on Medicare can take, correct?
    I do want to go back to--also, you had pointed out that 
initially the risk corridor was temporary. It was a 3-year 
temporary risk corridor when Medicare Part D was put together. 
Is that correct?
    Mr. Hoadley. No. Actually, it was set up as a permanent 
part of the program. It was set at a different width. The 
amount of potential payments in or out was greater in the first 
3 years, stepped back in the second 3 years----
    Mrs. Ellmers. OK.
    Mr. Hoadley [continuing]. And then left the Department with 
the option of what to do with it thereafter.
    Mrs. Ellmers. And then CMS, at that point, continued it. Is 
that correct?
    Mr. Hoadley. Right.
    Mrs. Ellmers. So, you know, in your opinion--and, of 
course, this is your opinion--can you see the same thing 
happening with the Affordable Care Act, considering that it is 
at this point supposedly temporary?
    Mr. Hoadley. So, in the Affordable Care Act, it is very 
specific in the law that it is good for just the 3 years, so 
there is no option----
    Mrs. Ellmers. But CMS could make that change if they so 
chose.
    Mr. Hoadley. No, they could not.
    Mrs. Ellmers. OK. Well, I want to point something out to 
you along that line. Today, the House Oversight and Government 
Reform Committee's chairman, Darrell Issa, released a report: 
``ObamaCare's Taxpayer Bailout of Health Insurers and the White 
House's Involvement to Increase Bailout Size.''
    The report includes email correspondence showing that 
senior advisor to President Obama Valerie Jarrett directly 
intervened in response to an insurance company CEO's threat to 
increase premiums unless the White House acted to expand 
Obamacare's taxpayer bailout of insurance companies.
    Mr. Chairman, to this I would like to add this exchange, 
this email, and this report from Oversight and Investigation to 
our report today.
    Mr. Pallone. Mr. Chairman, I haven't seen this report, so I 
reserve----
    Mrs. Ellmers. Well, there again, I would like to submit it.
    Mr. Pallone. Well----
    Mrs. Ellmers [continuing]. If possible, and----
    Mr. Pallone. Well, sure, you can. But I would like to 
reserve, you know, the opportunity to object to it. I would 
have to see it.
    Mrs. Ellmers. OK.
    Mr. Pitts. We will wait until it comes down.
    Mrs. Ellmers. Great. OK, wonderful.
    Well, to that, I guess my point is that this is all subject 
to change based on how the program is going.
    And, to that, Mr. Haislmaier, I have a question for you. As 
far as the risk corridor goes, do you see this as--you know, I 
know you had mentioned some of the risks because of, you know, 
back-door deals. You know, we are trying to keep this budget-
neutral, as happened with Medicare Part D in a program that 
worked very well.
    Do you see this as just an effort politically to keep 
premium costs down in order to move forward on this? I mean, 
could this be, this risk corridor?
    Mr. Haislmaier. Well, I think that is a very legitimate 
concern, ma'am. And I think what animates a lot of the concern 
is, clearly, the administration in many ways has been trying to 
keep premiums down, and this would be an avenue for them to 
make up some of that money. That is the concern that is here.
    And the way the statute is written, at least for the first 
3 years, they could exploit the ambiguity in the statute to do 
that. So that is, I think, why you are having the hearing here, 
is to say, well, we have to either get rid of it or make sure 
that it is clear that that can't be done by being budget-
neutral.
    Mrs. Ellmers. Uh-huh.
    Mr. Haislmaier. Clearly, that potential is there, though. 
We don't know yet until we see the results for the first year 
of actual premiums.
    Mrs. Ellmers. And to that point, you know, we have Medicare 
Part D, and we can look back on Medicare Part D and we can 
watch the way that it played out. We are still, you know, 
waiting to see how the----
    Mr. Haislmaier. We are in mid-process----
    Mrs. Ellmers. Lastly, Mr. Veuger, in the 25 seconds that I 
have, I guess just a ``yes'' or a ``no'' answer. I know we were 
talking with Dr. Cassidy about, you know, what Members of 
Congress may or may not have known, whether or not individuals 
would be able to keep their healthcare plan. Do you believe 
that the President knew that they would not be able to keep 
their insurance plan?
    Mr. Veuger. I don't know, but I would hope that he knew.
    Mrs. Ellmers. OK. Thank you. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Mr. Pitts. The Chair thanks the gentlelady.
    Has the staff been able to get the report that you referred 
to? You have it? Can you--have you given it to the----
    Mr. Pallone. Mr. Chairman, the problem that I have is that 
my understanding is that Chairman Issa hasn't made these 
reports public. And so that is one of the reasons I am 
objecting at this time until we have an opportunity to see it.
    Mr. Pitts. Go ahead. Go ahead. It was released today.
    Mr. Cassidy. It was released today. I can forward a copy to 
Mr. Pallone.
    Mr. Pallone. Oh, why don't you just--we will reserve our 
objection until we see it. You give it to us, and we will take 
a look. Until today, he hadn't made them public. I didn't even 
know he made it public today, but I believe you, but I just 
haven't seen it.
    Mr. Pitts. All right. We will get it to you today. And 
then, without objection----
    Mr. Pallone. No. We are objecting until we have seen it, 
Mr. Chairman.
    Mr. Pitts. The report is coming. We will hold until the 
report comes down.
    OK. We still don't have the report here. We have 10 days to 
get it to Mr. Pallone.
    So if you will let us know------
    Mr. Pallone. Sure.
    Mr. Pitts [continuing]. Once you get to see the report, and 
then, without objection, we will enter it into the record.
    [The information is available at http://docs.house.gov/
meetings/IF/IF14/20140728/102551/HHRG-113-IF14-20140728-
SD006.pdf.]
    Mr. Pitts. All right. I remind Members they have 10 days, 
10 business days, to submit questions for the record.
    And I am sure the Members will have follow-up questions for 
the witnesses, so we will submit those to you. We ask that you 
please respond promptly.
    And so Members should submit their questions by the close 
of business on Monday, August 11th.
    Thank you very much for your testimony.
    Without objection, the subcommittee is adjourned.
    [Whereupon, at 5:26 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
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