[Senate Hearing 113-276]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 113-276

 
                      HEALTH INSURANCE EXCHANGES: 
                            PROGRESS REPORT

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

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 14, 2013

                               __________

                                     
                                     

            Printed for the use of the Committee on Finance


                                 ______

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                          COMMITTEE ON FINANCE

                     MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
Virginia                             CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon                    MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan            MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington           JOHN CORNYN, Texas
BILL NELSON, Florida                 JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey          RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware           JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland         ROB PORTMAN, Ohio
SHERROD BROWN, Ohio                  PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., Pennsylvania

                      Amber Cottle, Staff Director

               Chris Campbell, Republican Staff Director

                                  (ii)
?



                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

                                                                   Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman, 
  Committee on Finance...........................................     1
Hatch, Hon. Orrin G., a U.S. Senator from Utah...................     3

                               WITNESSES

Cohen, Gary, Deputy Administrator and Director, Center for 
  Consumer Information and Insurance Oversight (CCIIO), Centers 
  for Medicare and Medicaid Services, Department of Health and 
  Human Services, Washington, DC.................................     5
Hughes, Don, Advisor to the Office of the Governor, State of 
  Arizona, Phoenix, AZ...........................................    25
Ferguson, Christine, Director of the Rhode Island Health Benefit 
  Exchange, State of Rhode Island, Providence, RI................    27
Tweardy Riveros, Bettina, Advisor to the Governor and Chair of 
  the Delaware Health Care Commission, State of Delaware, 
  Wilmington, DE.................................................    29

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:
    Opening statement............................................     1
    Prepared statement...........................................    37
Cohen, Gary:
    Testimony....................................................     5
    Prepared statement...........................................    40
    Responses to questions from committee members................    52
Ferguson, Christine:
    Testimony....................................................    27
    Prepared statement...........................................   124
Hatch, Hon. Orrin G.:
    Opening statement............................................     3
    Prepared statement...........................................   127
Hughes, Don:
    Testimony....................................................    25
    Prepared statement...........................................   131
Tweardy Riveros, Bettina:
    Testimony....................................................    29
    Prepared statement...........................................   139

                             Communication

AARP.............................................................   145

                                 (iii)


                      HEALTH INSURANCE EXCHANGES: 
                            PROGRESS REPORT

                              ----------                              


                      THURSDAY, FEBRUARY 14, 2013

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 9:48 a.m., 
in room SD-215, Dirksen Senate Office Building, Hon. Max Baucus 
(chairman of the committee) presiding.
    Present: Senators Wyden, Cantwell, Nelson, Carper, Cardin, 
Casey, Hatch, Grassley, Crapo, Roberts, Enzi, and Isakson.
    Also present: Democratic Staff: Amber Cottle, Staff 
Director; David Schwartz, Chief Health Counsel; and Tony 
Clapsis, Professional Staff. Republican Staff: Kim Brandt, 
Chief Healthcare Investigative Counsel.

   OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM 
            MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. The hearing will come to order.
    I apologize to everybody for the delay. Something 
unavoidable came up, but we are here.
    In early 1964, just 2 months after the assassination of 
John F. Kennedy, President Lyndon Johnson delivered his first 
State of the Union address. He called on Congress to move 
forward with the late President's bold agenda. He said we have 
``a unique opportunity and obligation to prove the success of 
our system. If we fail, if we fritter and fumble away our 
opportunity in needless, senseless quarrels between Democrats 
and Republicans, or between the House and the Senate, or 
between the Congress and the administration, then history will 
rightfully judge us harshly.''
    Last summer the Supreme Court, once and for all, ruled the 
Affordable Care Act to be the law of the land, settling the 
issue. After nearly a century of Americans fighting for real 
health care reform, we finally passed the Affordable Care Act 
in 2010. Health insurance exchanges or marketplaces are one of 
the most vital tools created by the law to provide nearly every 
American with health care.
    Now is the time for us to work together to ensure that the 
law and these marketplaces are implemented properly. These 
marketplaces are a new frontier and create a real opportunity 
for more Americans to get health insurance. For far too long, 
individuals and small businesses across the Nation, shopping 
for health insurance, were left to fend for themselves.
    A Commonwealth Fund study found that nearly three-quarters 
of individuals looking for coverage on the individual market 
never bought a plan, with 61 percent of those citing premium 
costs as a primary reason.
    In preparation for this hearing, I did a little exercise 
and shopped around for health insurance online. I started, as 
most American families would, and typed into Google 
``individual health insurance plans.'' In 0.26 seconds--I love 
Google--106 million results appeared, everything from AARP, 
United, Blue Cross, CareFirst, Kaiser Permanente, and many 
others.
    Needless to say, it was already a bit overwhelming. In 
fact, I think this is one application right here--we printed it 
out--for one person. I clicked on one insurance carrier's 
website and found an application for their individual and 
family health plan. This is it: 97 pages long: a 24-page 
questionnaire, followed by a 73-page disclosure form. Now, I 
went to law school, and this is Greek to me. With the 
marketplaces, there will be one simple web form application for 
consumers.
    Before health reform, plans were too expensive, with little 
protections. Insurers were able to terminate coverage when 
patients had cancer simply because these patients did not 
disclose a teenaged bout with acne or a bump on the chin as a 
child.
    Plans were described in legal jargon instead of plain 
English. Large companies, on the other hand, could use the 
leverage that came with their size to negotiate better plans at 
more stable prices. This inequality in the health care system 
created yet another case of the haves and the have-nots. But 
not anymore. The marketplaces created in health reform will 
help level the playing field. For the first time, individuals 
and small businesses will be able to pool their purchasing 
power to get better bang for their buck.
    Consumers will have access to one-stop competitive shopping 
for affordable health care, just like they have on Orbitz or 
Kayak for airfare and hotels. These marketplaces will provide 
clear comparisons of quality and price across the plans. At 
least, that is the goal. We have to make sure that happens.
    We already shop in competitive marketplaces for groceries, 
airline tickets, and cars. There is no reason the health 
insurance market should be any different. These marketplaces 
are scheduled to be up and running across the country on 
October 1st for coverage effective January 1, 2014.
    Two other critical components of the health care law are 
paired with the marketplaces: first, consumers will no longer 
have to worry about being denied coverage due to a preexisting 
condition or when they get sick; and second, tax credits will 
be available to help American families and businesses purchase 
insurance.
    I know the Department of Health and Human Services has been 
hard at work for nearly 3 years in preparation, but there are 
challenges. I want to make sure the Department is ready on day 
1. It is important for the Congress and for the Finance 
Committee, on behalf of the American people, to closely oversee 
implementation of these new programs, especially the 
marketplaces.
    I expect Senators to ask a lot of questions, because there 
are a lot of challenges ahead. That is why we are here today. I 
expect to hear about the significant progress that the Centers 
for Medicare and Medicaid Services and States have made in 
implementing the marketplaces.
    I am pleased with the level of flexibility that CMS has 
provided to States in order to get marketplaces up and running. 
Instead of a one-size-fits-all solution, CMS has worked with 
States to craft customized marketplaces that fit the specific 
needs of their residents, because all of us in Montana can 
assure you that Montana is a bit different from New York.
    CMS has told States they can run their own marketplace or 
share the responsibilities. If it prefers, it can let CMS 
facilitate the marketplaces. States are also free to make 
changes down the road.
    This flexibility is key to making sure that marketplaces 
work in each State across the country. We will ask CMS today 
whether progress is on track, targets are being met, and what 
more can be done to realize the promise of the Affordable Care 
Act. We will also hear from three States, each of which will 
provide unique perspective on the opportunities and challenges 
in creating these new marketplaces.
    So, as President Johnson urged in his State of the Union 
address, let us remember our obligation as we approach the 
marketplaces' launch this fall. We have a real opportunity here 
to help Americans access affordable health care in a consumer-
friendly way for the first time in a century. So let us not 
``fritter and fumble away our opportunity in needless, 
senseless quarrels.'' Let us ensure that these marketplaces 
live up to their promise and deliver unprecedented access to 
high-quality health care.
    [The prepared statement of Chairman Baucus appears in the 
appendix.]
    The Chairman. Senator Hatch?

           OPENING STATEMENT OF HON. ORRIN G. HATCH, 
                    A U.S. SENATOR FROM UTAH

    Senator Hatch. Well, thank you, Mr. Chairman. Thank you for 
holding this hearing. I welcome this opportunity to join you in 
conducting congressional oversight on the implementation of the 
President's health law, and more specifically on the nature of 
health care exchanges.
    It is no secret that the President promised that his plan 
to reform the health care system would reduce premiums by 
$2,500 for individuals. He made this promise more than once, 
and at the time I was skeptical, and I said so. As we are 
seeing now, I had good reason to be. We are already feeling the 
impact of the law as the cost of insurance premiums continues 
to go up.
    In 2014, when the law will be fully implemented, premiums 
will skyrocket further as insurers scramble to meet all of the 
new mandates that go into effect. The question is, how high are 
these costs going to go? We have estimates from an Oliver Wyman 
study that suggest premiums in the individual market next year 
will increase an average of 40 percent.
    The Society of Actuaries similarly estimates an average 
increase of 32 percent in premiums in the individual market, 
and, for many communities, it gets even worse. A recent survey 
of health plans reveals that premiums in the individual market 
in Phoenix, AZ could see an average increase of 157 percent; 
Milwaukee, WI will see an average increase of 190 percent.
    If the point of the health care law was to reduce costs and 
increase access, these estimates show that it appears to have 
already failed. Some of the law's supporters will say that 
these premium increases will be mitigated by the new health 
insurance subsidies; however, the Oliver Wyman study that I 
referred to found that 40 percent of those covered in the 
individual health insurance market in 2011 would be ineligible 
for these subsidies in 2014.
    It also found that 36 percent of those currently uninsured 
can expect to pay more out of pocket for single coverage than 
they would otherwise, even with the availability of premium 
assistance. These rate increases will have a significant impact 
on the ability of individuals to purchase coverage. It was bad 
policy when we debated it, it was bad policy when the Democrats 
rammed it though the Senate, and it is still bad policy today.
    Now consumers are starting to see its impact just as they 
are about to be able to enroll in the new health exchanges. 
Today we are here to discuss these exchanges. As most of you 
know, I have a particular interest in this issue, because the 
State of Utah was one of the first States to establish a 
market-based State exchange prior to the passage of the law 
that met its unique demographic needs.
    The administration claims that health insurance exchanges 
will allow plans to compete for business, and therefore the 
cost of health insurance will be reduced. Unfortunately, the 
exchanges, as designed in the law, will do neither. They will 
actually increase health care costs.
    We know that State-based exchanges are being established in 
18 States. Of those States, 13 have published studies providing 
annual budget estimates for establishing and maintaining State 
exchanges. Those annual budget estimates range from $6 million 
to $300 million and will be funded through the establishment of 
exchange user fees.
    Similar to State-based exchanges, the federally facilitated 
exchange will be funded through the imposition of onerous user 
fees. The administration recently proposed a 3.5-percent fee on 
each plan offered through the exchange. This is no small 
amount. We all know the costs will be passed on to consumers in 
the form of higher prices.
    So I am concerned about this, as you can imagine, and have 
been from the beginning. I do not mean to find fault with those 
who are trying to do what is right, but I just do not see how 
it is going to work, and I do not see how it is going to work 
in an efficient, cost-saving way.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    [The prepared statement of Senator Hatch appears in the 
appendix.]
    The Chairman. I am pleased now to welcome our first 
witness, Gary Cohen, Director of the Center for Consumer 
Information and Insurance Oversight at the Centers for Medicare 
and Medicaid Services. Then, when we get to the second panel, I 
will introduce them at that time.
    So, Mr. Cohen, why don't you proceed? Your statement will 
be in the record. You can summarize it in about 5 minutes. And 
do not pull any punches. Tell us what is really going on--not a 
bunch of stuff, but what is going on.
    Mr. Cohen. I will, Senator. Thank you.
    The Chairman. All right.

  STATEMENT OF GARY COHEN, DEPUTY ADMINISTRATOR AND DIRECTOR, 
    CENTER FOR CONSUMER INFORMATION AND INSURANCE OVERSIGHT 
(CCIIO), CENTERS FOR MEDICARE AND MEDICAID SERVICES, DEPARTMENT 
          OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC

    Mr. Cohen. Thank you, Chairman Baucus, Ranking Member 
Hatch, and members of the Finance Committee, for the invitation 
to appear before you today. As Director for the Center for 
Consumer Information and Insurance Oversight at the Centers for 
Medicare and Medicaid Services, I oversee implementation of 
many of the provisions of the Affordable Care Act, including 
the exchanges or marketplaces.
    I know the biggest questions on everyone's mind today are: 
are we making progress, are we on track, and will we be ready? 
I am very pleased to be here today to tell you that, yes, we 
are making great progress, we are on track, and we will be 
ready for people all across the country to obtain high-quality, 
affordable health care coverage beginning on October 1st.
    I thought it would be helpful to describe for you how a 
person will experience the new health insurance marketplace, 
and, as I do, to give you an idea of where we are in the design 
and building of it.
    Picture a consumer today. For example, a Mr. Smith, who is 
a resident of Montana, who is curious about his health 
insurance options under the health care law. He goes online. He 
types ``healthcare law'' into a search engine, and he finds 
Healthcare.gov. We re-launched the website recently with 
consumer-friendly videos and other information. Mr. Smith sees 
some helpful tips about the marketplace and the information he 
will need when he returns to the website to get enrolled in 
coverage this fall.
    In October, Mr. Smith finds a single, streamlined 
application that will enable him to find out whether he and his 
family are eligible for Medicaid, CHIP, or for tax credits to 
help pay for his insurance premiums to a commercial insurer.
    CMS has consulted with States, stakeholders, consumer 
groups, and the National Association of Insurance 
Commissioners, in developing this application. We conducted 
consumer testing to ensure that it makes sense to consumers at 
different income and educational levels.
    Since the information that Mr. Smith provides can be shared 
with State Medicaid and CHIP agencies, Mr. Smith will only have 
to submit one application. On January 28th, the public comment 
period began on both applications for individuals and for small 
businesses, and we expect them to be finalized by April.
    Now, Mr. Smith enters some basic information about himself 
and his family. CMS is building a data services hub that will 
access information from several sources, including the Social 
Security Administration, Department of Homeland Security, and 
the IRS, to verify the information that Mr. Smith enters about 
his citizenship status, his income, and so forth.
    This data is subject to strong privacy and security 
protections, and it is important to note that the hub will not 
store any consumer data. Its purpose is to allow a seamless 
flow of information from different sources. We have already 
completed the hub's technical design and reference 
architecture. We are establishing a framework for security 
across agencies and protocols for connectivity across agencies 
and with States, and we have begun testing the hub.
    Mr. Smith finds out in real time that he is eligible for 
tax credits to help pay for coverage through the marketplace, 
and he starts shopping for a plan. We are well-along in the 
process of making sure that he will find a variety of 
affordable, comprehensive, qualified health plans to choose 
from. CMS is building a plan management infrastructure that 
will enable us to receive, review, and approve applications 
from issuers for plans to be sold in the Federal marketplace.
    In November of last year, we provided issuers with a draft 
of the templates that they will use to submit their plans. We 
have gotten feedback on them, and issuers will begin submitting 
applications to us at the end of March. We will review those 
applications and will approve plans to be sold in the Federal 
marketplace by this summer. Issuers will then have an 
opportunity to review and make any corrections to the 
information about their plans that will appear on the website 
beginning in October.
    Once Mr. Smith chooses a plan that he thinks is right for 
himself and his family, the marketplace website will 
electronically transmit his enrollment data directly to the 
issuer and will provide a link for him to the issuer's website, 
where Mr. Smith will be able to pay his first month's premium 
so his coverage will begin and be effective on January 1st.
    Now, because Mr. Smith visited Healthcare.gov earlier in 
the year and was prepared with the basic information he needed, 
he was able to complete this entire application process in as 
little as 30 minutes. But we know that many people will need 
some help, and a number of resources will be available to them.
    First, of course, a consumer may choose to work with an 
insurance agent or broker in his or her community or with an 
online web broker. For the marketplace that the Federal 
Government is managing, we are building a web portal for agents 
and brokers that will enable them to submit applications on 
behalf of individuals and small businesses.
    Consumers will also be able to get help from a navigator, 
funded by a grant from CMS or by a State that is operating its 
own marketplace. Our first funding opportunity for navigators 
will be going out shortly. We will fund people in the community 
who will be trained and certified to provide fair, accurate, 
and impartial information to consumers.
    Consumers will also be able to get help through a call 
center that will be available 24/7, will make assistance 
available in over 150 languages, and will have assistance for 
the hearing impaired. As you can see, we have made great 
progress. More work remains to be done, of course, and I look 
forward to continuing to work with States, stakeholders, 
issuers, consumers, and this committee on readying the 
marketplace for open enrollment. I am confident that the 
marketplace will be open and ready for business on October 1st.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Mr. Cohen.
    [The prepared statement of Mr. Cohen appears in the 
appendix.]
    The Chairman. Of course, there are a million questions. Let 
me just start in one area. That is, what differences are there 
among the States? One State wants to access the marketplace. It 
begs the question whether it is State-based or federally run. 
Compare it with another State. To what degree will each person 
across the country, irrespective of States, experience the very 
same experience compared with not, because different States are 
different? What is going to be different among the States?
    Mr. Cohen. So, among the States where CMS will be operating 
the marketplace, the application will be the same. So, the 
experience for all those people will be exactly the same. 
States have the option of using our application or of modifying 
the application if they choose to, but they need to comply with 
all of the same criteria and requirements as will be true with 
the application that we are creating. So we anticipate that the 
experience will be very much the same all across the country in 
terms of the experience of coming online and applying for 
coverage.
    The Chairman. Could States change their minds? What happens 
when they change their minds? Can one State maybe be federally 
based and then decide it wants to be State-based? Can you go 
back? ``We do not want to do that anymore; we want the Feds to 
do it.'' I doubt that is ever going to happen, but, 
nevertheless, what flexibility do States have in deciding 
whether they want to run these marketplaces compared with the 
Feds?
    Mr. Cohen. As you know, we have encouraged States to 
operate their own marketplaces because we do believe that that 
gives them the most flexibility to serve their communities in a 
way that they believe is best for them. Not all States have 
been prepared to do that for 2014, but there will be 
opportunities beginning later this year to apply to operate a 
State marketplace beginning in 2015 and in years thereafter.
    So States absolutely will have that opportunity, and we 
will have the ability to learn from the experience of the 
States that have moved along a little faster to operate their 
own marketplaces, and we will also benefit from a lot of the 
work done by those States, because one of the requirements of 
the grants that we are giving to States is that the work that 
they do and that their vendors do be made available to other 
States as well.
    The Chairman. Could you give me the list of the various 
agencies where information has to be coordinated? You know, 
HHS, CMS, IRS. Just give me a list of all the other agencies 
where the box has to be checked.
    Mr. Cohen. Social Security, IRS, Homeland Security, and 
there may be others. I may have to get back to you with the 
complete list, but those are the major ones.
    The Chairman. I am a little surprised you do not know that, 
you cannot just rattle those off, bing, bing, bing, bing, bing, 
because that is going to be key to the efficiency of these 
marketplaces. You cannot think of the others?
    Mr. Cohen. Those are the main ones that I can think of at 
this moment, but I am happy to get you that list.
    The Chairman. How are you going to be assured that the 
computers in all these different agencies are speaking the same 
language and they are all up and running? I mean, to tell you 
right off the top, two of those agencies you have already 
listed, I know have archaic computer systems today.
    Mr. Cohen. So, I am encouraged by the fact that we actually 
have already begun testing with Social Security, with Homeland 
Security, and with IRS on exactly what you are raising, 
Senator, the flow of data back and forth. So we are well-along 
with that process and expect to be able to complete that 
testing by this spring. So, I do not think we are going to 
experience problems there.
    The Chairman. What do you mean by ``well-along?'' What does 
that mean?
    Mr. Cohen. We have begun that testing, and we have a 
process where we will continue testing, continuing from now 
until the spring when it will be completed.
    The Chairman. How much information do you intend to share 
with this Congress as to how well this is progressing? That is, 
what happens if, in a month or two, you think, oh my gosh, we 
have a huge problem here. Is that information going to be 
shared with anybody, or are you just going to keep it to 
yourself?
    Mr. Cohen. We are happy to work with you and provide you 
with the information that you request from us.
    The Chairman. So, at this point, are there any ``uh-oh'' 
revelations?
    Mr. Cohen. No, we are very much on track with a plan that 
will get us to open enrollment beginning on October 1st.
    The Chairman. What about those different computer systems I 
asked about? Is it not true that almost all agencies have 
different computer systems that speak different languages?
    Mr. Cohen. I think that is why we are building this data 
hub, and it is designed in a way that it can accept data from 
the different agencies, and it can verify information coming 
into the data hub that will be entered as part of the 
application process.
    The Chairman. Well, my time is up.
    Senator Hatch?
    Senator Hatch. Thank you, Mr. Chairman.
    Mr. Cohen, the CMS guidance document on partnership 
exchanges provides an aggressive time schedule of only 10 
months between the plan application process and the first day 
of coverage. This is mostly due to a delay in issuing 
regulations, many of which have yet to be made final. In a 
little over 1 month, Americans will be able to enroll in plans 
that will start October 1st. We are literally over 1 month away 
from the application process really beginning.
    Now, I recall that the Medicare Part D implementation 
timeline provided 2 years between the application process and 
the first day of coverage. We all remember some of the hiccups 
that occurred when the enrollment efforts first began.
    Applying the lessons learned from the implementation of 
Medicare Part D, I have a hard time understanding how the 
administration expects to have exchanges up and running by 
October 1st, especially since we have no details on how the 
exchanges will work in over half the States. Now, with less 
than 8 months before open enrollment, how can you be confident 
that Americans will be able to enroll in plans starting October 
1st?
    Mr. Cohen. Well, Senator, the partnership really enables 
States to continue doing their traditional State regulatory 
function, as they have done historically, in reviewing plans 
and approving them for sale.
    So it really does not call on States to perform a lot of 
very new functions. Their job is to have the issuer submit 
plans to them, to review those, and to make sure they meet the 
qualifications that are required under the law to be sold in 
the new marketplace.
    The other aspect of the partnership is consumer assistance, 
which again is a very traditional function that States have 
historically performed very well and which enables them to 
tailor the operation of the marketplace, their outreach, and 
the assistance that they provide consumers, to their 
communities.
    As far as the eligibility enrollment system goes, we are 
building a system that will function across all of the States 
where CMS will be operating the marketplace. As I said, we are 
well-along and on track and hitting our milestones to have that 
be ready for October 1st.
    Senator Hatch. Mr. Chairman, I am going to have to go to 
Judiciary for a little while, but I am going to try to get 
back.
    The Chairman. Sure.
    Senator Hatch. That is how I will ask for additional time.
    The Chairman. Fine. Thank you, Senator.
    Senator Cantwell?
    Senator Cantwell. Thank you, Mr. Chairman. You asked our 
witness to just go at it and do not tell us a bunch of stuff, 
so I am going to try to encourage the same discussion. It kind 
of reminds me already, there is a maxim in politics: a campaign 
does not a candidate make. That means you do not make somebody 
just because you have a campaign. It sounds to me this morning 
a lot about, technology does not make a cost-effective health 
plan. The details of how to drive down costs make a cost-
effective health plan.
    So I am wondering if you can tell me why the Federal basic 
health option, which was supposed to be implemented in 2014 in 
conjunction with--not in the exchange but in conjunction with--
is not being implemented.
    Mr. Cohen. Thank you, Senator. I appreciate your interest 
in the basic health plan. I have heard a lot of interest in the 
basic health plan as I have gone around the country and talked 
to different States and different groups.
    Given the scope of all of the coverage changes that States 
and the Federal Government will be implementing for January 1st 
and the value that we see of building on the experience that 
will be gained from those changes, we expect to issue proposed 
rules on the basic health plan for comment this year and make 
them final in 2014, so the basic health plan would be 
operational beginning in 2015 for States that are interested in 
pursuing that.
    Senator Cantwell. Well, I know even the President has kind 
of weighed in and said this is important, and I certainly 
appreciate that. But the law says that you are supposed to 
implement this in 2014, so we are very concerned about the 
approach by the agency in trying to thwart this effort.
    So my question is, can you promise this committee that the 
agency is not offering any deals to States to get them to take 
a population that they have been able to achieve a more cost-
effective delivery system for and trying to shove them onto the 
exchange as opposed to doing the basic health plan?
    Mr. Cohen. I think what we are doing is working with States 
to identify as much flexibility as we can to assure continuity 
of coverage as individuals' incomes change, and to make it 
possible to provide premium assistance for people to purchase 
coverage through the exchange.
    Senator Cantwell. Are you artificially raising the cost to 
all taxpayers by trying to lure people onto the exchange as 
opposed to giving them this option that is mandated by Federal 
law to be implemented in 2014?
    Mr. Cohen. No.
    Senator Cantwell. You are sure of that?
    Mr. Cohen. Yes.
    Senator Cantwell. So, if this committee asks for the 
specific details, it could get details?
    Mr. Cohen. We will be happy to work with you to get you 
details. Yes, Senator.
    Senator Cantwell. And so, do you believe that you have a 
requirement to implement this by 2014? I get the feeling you 
are overwhelmed by the details of technology. I get that point. 
But I am trying to emphasize a very important point here.
    This committee and many people on this committee are very 
knowledgeable about State health plans that have driven down 
the cost to their consumers, and so it seems as if the agency 
is taking, I do not know how many pages out of 900, and saying, 
that is the health plan. It is the health plan of exchange. 
Where is the health plan of CO-OPs? Where is the health plan of 
the basic health plan? As far as I am concerned, I think the 
President signed all 900 pages. I do not think he just said, it 
is just this one page.
    What I am very concerned about is that the agency seems to 
be thinking that the technology of the exchange is somehow the 
Holy Grail, and you are trying to lure States out of pursuing 
these CO-OP or basic health plan options and lure them onto the 
exchange because you think it is some sort of magic, and you 
are ignoring 20 years of experience, at least from my State's 
perspective, of delivering 20 to 30 percent more cost-effective 
delivery plans than what these individuals were able to get in 
the private sector.
    So we do not want to throw that away; we want it to be 
implemented. Our read of the statute is that you are supposed 
to do it in 2014 and not spend your time luring people into the 
exchange.
    Mr. Cohen. Well, I do not think we are trying to lure 
people into the exchange. We have funded 24 CO-OPs, and we are 
working with them to be as successful as they possibly can be. 
And I agree with you that they are an important element of this 
in providing additional competition in what in many States is a 
very concentrated market. We agree with you.
    Senator Cantwell. So you have no fear that these can stand 
alone and be separate?
    Mr. Cohen. I am sorry?
    Senator Cantwell. You have no fear that a basic plan or a 
CO-OP can stand alone and not be part of the exchange?
    Mr. Cohen. No.
    Senator Cantwell. All right. Well, we look forward to 
seeing the details of these other States proposals you have 
been working on.
    Thank you, Mr. Chairman.
    Mr. Cohen. Thank you.
    The Chairman. Thank you, Senator.
    Senator Nelson?
    Senator Nelson. Mr. Chairman, the health care law is 
working. Now, there are a couple of big obstacles in the way. 
One is, in some of the States, like my State, the State 
legislature and the Governor refuse to expand Medicaid--that is 
1 million people in the State of Florida who would otherwise 
have health care--and refuse to implement the health care law, 
refuse to accept the grants that have come. All right. That is 
one thing.
    It is too bad that all the States did not comply, and the 
people of Florida are going to suffer because of the State 
government. But the fact is, the law says that there is going 
to be a health insurance exchange come 2014. So now we move to 
the next obstacle, which Senator Cantwell has just pointed out: 
the implementation of it.
    Of all of these incentives in the law to drive down the 
cost, one of those incentives that we put in the law was the 
community-
oriented health plans. A consumer-oriented board would run a 
health insurance company. It was estimated that these were 
going to bring down the cost of premiums to the consumer by 10 
to 15 percent.
    Mr. Chairman, in the 11th-hour negotiation on trying to 
avert financial disaster on December 31st, New Year's Eve, 
these guys negotiated away the Consumer Operated and Oriented 
health Plans, CO-OPs. That is the acronym for it: CO-OP. So I 
want to ask, why was that negotiated away? You have given 
grants into CO-OPs, approved applications for 24 States, but 
not the other remaining 26. There were applications in the 
pipeline, including applications from my State of Florida. Why 
was that negotiated away at the 11th hour?
    Mr. Cohen. Senator, first, I want to say we are big 
supporters of CO-OPs. I mean, we are working----
    Senator Nelson. No, the question is, why was that lost at 
the 11th hour, not that you are a fan of them. What is the 
answer?
    Mr. Cohen. I do not have an answer for you.
    Senator Nelson. Well, I can tell you that the 
representative of the Majority Leader, Kate Leone, in the 
negotiations, has told this Senator that, first of all, HHS had 
put CO-OPs on the table as a source of revenue.
    At the 11th hour, the question was asked, ``Are there any 
applications in the pipeline?'' In those 11th-hour 
negotiations, the answer, according to the Majority Leader's 
office, was, ``No, there are no applications,'' when in fact, 
over the course of the last year, only 24 States' applications 
had been granted.
    Obviously there were plenty of applications. There were 
applications out to be awarded right after the first of the 
year. So I want somebody to be accountable for this and, if it 
was a mistake, for somebody to own up to it. And then the 
question is, since you say you do not know, I would ask, Mr. 
Chairman, that this committee require an accounting that HHS 
respond to this question: how did it happen that it got 
negotiated away?
    Now my question would be, what are you going to do about it 
since CO-OPs, in fact, are estimated to bring down the cost 10 
to 15 percent for the consumers, for the premium-payers? What 
are we going to do to get those other 26 States into the 
system?
    Mr. Cohen. Well, Senator, what I am going to do is make 
sure that the 24 CO-OPs that we have funded are successful and 
demonstrate the results that you are talking about in terms of 
providing additional competition and lowering costs in the 
health market. That is what I can do at this point.
    Senator Nelson. So the answer is that the remaining 26 
States get zero?
    Mr. Cohen. As of the current situation, we do not have 
authority to make loans to any additional CO-OPs. That is 
correct.
    Senator Nelson. Mr. Chairman, if we have this kind of 
implementation, then we are not going to fulfill the goal that 
we all set when we laboriously put together, in your committee, 
this health care bill.
    The Chairman. Might I ask, Mr. Cohen, you are saying that 
CMS does not have the authority to give grants to these other 
CO-OPs but does for some CO-OPs? Why the difference? I do not 
understand.
    Mr. Cohen. No. We have made loans to 24 CO-OPs, and, under 
the legislation that was passed at the end of the year, we no 
longer have authority or funding to make any more loans to new 
CO-OPs.
    The Chairman. All right. That is my question. Is it that 
you do not have the money or do not have the authority?
    Mr. Cohen. I think it is both.
    The Chairman. I would follow up on the question Senator 
Nelson asked: why not the authority? I want the answer to that 
question as to what happened. Another answer is, what could the 
policy rationale be?
    Mr. Cohen. My understanding of what was passed at the end 
of the year is that we no longer have funding authority to make 
loans to new CO-OPs.
    The Chairman. I am not talking about money; I am talking 
about authority. All right. We will have to get to the bottom 
of this.
    Senator Enzi?
    Senator Enzi. I cannot thank you enough, Mr. Chairman, for 
holding this hearing. I cannot thank Senator Cantwell and 
Senator Nelson enough for the questions that they have asked. 
They are part of a series of questions that I had as well.
    I am not sure how all this can come together, and part of 
it is because the States are not getting answers. My Governor 
wrote, on July 19, 2012, trying to find out enough about the 
exchange so that our legislature could deal with the exchange. 
That is how we insist on doing it in Wyoming.
    The Governor does not have blanket authority to do whatever 
he wants. He does point out in his letter that we are a real 
frontier State and he does know that Rhode Island and Delaware 
are making progress, but he also points out that Wyoming has 
half the population of Delaware or half the population of Rhode 
Island, and we are spread out over a much bigger geographic 
area.
    Now, he wrote the letter in July 2012, and he got an 
answer. No, he did not get an answer; he got a letter in 
January of this year. Now, that is for getting an exchange 
done? Our legislature meets every year, but this is the year 
that they do law. Next year they just do budget and 
appropriation, so they needed the information before this 
session started in January. It just lasts January and February. 
Actually, it only lasts 40 days, and, in truth, it will only 
last 38 days. They do not use their full allotted time because 
they like to save 2 days in case the Governor vetoes something 
that is important to them so they can call themselves back into 
session.
    So they have virtually no chance to work on the exchange. I 
guess that leaves the Federal exchange. I am not sure that they 
will have a problem with the Federal exchange except for all of 
the unanswered questions about a Federal exchange. I cannot 
believe that we are forcing every State in the Nation to try to 
write their own program. That has to have a cost. I mean, it 
probably costs just as much as doing a Federal exchange. I have 
no idea how much money we are putting into writing the programs 
for this Federal exchange.
    I like what you described in the Federal exchange, but that 
is kind of what we are expecting each State to do at that 
State's cost. But you are providing the money for it, so my 
first question, I guess, would be, HHS is kind to give kind of 
a blank check, set sums as necessary, to implement the health 
exchanges. Will there be any cap on the amount of money the 
Federal Government will use to do this? If not, why not?
    Mr. Cohen. The amount of money that we award in grants to 
States to plan and establish their exchange is based on an 
application that they submit to us and a thorough and rigorous 
evaluation of what the needs are in order to do that.
    I think as time goes by, and if States choose to operate 
their own exchange in future years, they will benefit from a 
lot of the work that has already been done, because, as I 
mentioned, one of the requirements of these grants is that the 
work that vendors are doing for States now be made available to 
other States going forward.
    Senator Enzi. It does look to me as though you are trying 
to force everyone into a Federal exchange. That may be our only 
option. I notice that it is to be paid for with user fees. Who 
pays that user fee, the individual, the State, the insurance 
company? How much is that going to be?
    Mr. Cohen. What we have proposed is a user fee that would 
be 3.5 percent of premium owned by insurance companies selling 
products in the exchange.
    Senator Enzi. So it would be the insurance company paying 
it?
    Mr. Cohen. Based on the premium that they earn on selling 
their products in the exchange, yes.
    Senator Enzi. Now, on this Federal exchange, one of the 
things I have suggested in the past is that there be some right 
to buy insurance across State lines. Will that be the case at 
the Federal exchange?
    Mr. Cohen. The Federal exchange will--the products that 
will be sold on the Federal exchange will be sold within each 
State and will be approved by the State insurance departments 
of each State.
    There is a provision in the law for a multi-State plan that 
the Office of Personnel Administration will be operating, and 
they have issued some proposed regulations on that, but that is 
not my program.
    Senator Enzi. So, without those CO-OPs, there is not much 
opportunity to expand the amount of competition then. I see 
that my time has expired. I hope that the record will stay open 
so that we can submit questions.
    The Chairman. Absolutely. It will be open for at least 48 
hours.
    Senator Enzi. I have another 100 questions that my State 
needs answered, and we need them answered quicker than 6 months 
like we got with the response from the Secretary.
    The Chairman. On that point, Mr. Cohen, it would really be 
wise to answer these questions very promptly.
    Mr. Cohen. And I would just say--and we will do our best to 
answer the questions that we get as quickly as we can--I will 
say, with respect to Wyoming, I have personally met and spoken 
with the insurance commissioner of Wyoming a number of times 
with respect to the exchange and the options available to 
Wyoming. I know that my staff is on the phone with every State, 
talking with them about their development and the choices that 
they are making, on a regular basis.
    The Chairman. Thank you.
    Senator Isakson?
    Senator Isakson. Well, thank you, Mr. Chairman.
    Mr. Cohen, the first question I want to ask is the same 
question that was asked by the ranking member and the chairman, 
who probably talked to their Governors as well as to what they 
would like to ask. That is, can you give us certainty that the 
federally funded exchanges will be up and running on October 
1st? You answered that question with the example of Mr. Smith 
going to Healthcare.gov and the efficiency of that system.
    I have a couple of questions on that. Have you tested 
Healthcare.gov with consumers?
    Mr. Cohen. Yes.
    Senator Isakson. And how has that test been done? Has it 
been done by the agency or by----
    Mr. Cohen. We had focus groups, and we have had assistance 
with performing those consumer tests, and we have made changes 
to both the online application and to Healthcare.gov in 
response to that testing.
    Senator Isakson. Have you made any calculation or any 
estimate as to how many people will be able to use the Mr. 
Smith example on Healthcare.gov and how many are going to need 
assistance from agents or representatives of insurance 
companies, or counselors, or whatever?
    Mr. Cohen. I do not have a number for you, but I know that 
we are preparing to make available in-person assistance or 
telephone assistance to everyone and anyone who may need it. So 
the goal is to have these navigators who will be out there in 
the community, who will be local community-based organizations, 
who will be able to reach out into their local communities as 
well as the call center, which is more of a national thing. 
Then in addition to that, the website will have online chat 
capability as well.
    Senator Isakson. Will the navigators be employees of CMS?
    Mr. Cohen. They will be grantees of CMS but not employees.
    Senator Isakson. So they will be independent contractors, 
but they will be paid by CMS?
    Mr. Cohen. They will receive grants, yes.
    Senator Isakson. All right.
    Are you familiar with the medical loss ratio limitations of 
the Affordable Care Act?
    Mr. Cohen. I am.
    Senator Isakson. I understand some States have asked for 
waivers, and CMS has denied those waivers. But, if you have a 
substantial number of people, which I think you will, who will 
seek some type of human assistance rather than totally depend 
on technology, the medical loss ratio restrictions really 
eliminate a lot of people who currently provide that from being 
able to be compensated, primarily independent contractors for 
insurance agencies. Have you discussed that subject with 
anybody?
    Mr. Cohen. We certainly are in communication with 
stakeholders, including the insurance industry, around the 
medical loss ratio. We did grant reductions in the ratio to a 
number of States. We did deny them to some where we found that 
there would not be a disruption in the market as a result of 
the medical loss ratio.
    We found in 2012 that we returned over $1 billion in excess 
premiums to consumers as a result of the medical loss ratio. I 
think that the availability of the online website that we will 
provide, the call center that we will provide, will help 
insurance companies reduce their costs for some of this 
marketing that they would otherwise have to do to attract 
people to the marketplace.
    Senator Isakson. Well, as someone who ran a business for a 
long time and, being dependent on the technological revolution, 
started transitioning consumer access to our services away from 
human beings and to technology access, you had better be sure 
you get it right the first time, because, if it crashes and 
burns on October 1st, you have a huge problem. When you talk 
about something affecting every American, it is tremendous.
    I have another question. Forty percent of adults with 
income below $30,000 and 60 percent without a high school 
diploma do not use a computer at all, and that was as of 2010. 
So you are going to have a lot of people who are going to need 
that human assistance.
    Are you familiar with the Preexisting Condition Insurance 
Program?
    Mr. Cohen. Yes.
    Senator Isakson. On January 31st, your office issued a 
report on the program, noting that while the enrollment had 
been substantially less than you anticipated, the costs per 
enrollee have been much more expensive. Do you expect the 
Preexisting Condition Insurance Plan to run out of money before 
the end of 2013?
    Mr. Cohen. We made a number of changes already this year to 
the benefits that are offered in the Federal PCIP program, and 
we are continuing to monitor expenses very carefully. We 
understand that we have a set amount of funding that we are 
able to use for that program, and we will not exceed it.
    Senator Isakson. So that is the $5 billion, correct?
    Mr. Cohen. Yes.
    Senator Isakson. To that end, do you have a contingency 
plan, if you do run out before the end of the year, as to how 
you are going to transition these people?
    Mr. Cohen. We are looking at all sorts of options, but 
running out of money before the end of the year is one that we 
are doing everything we can to avoid, and I believe we will get 
to the end of the year and transition people onto the 
exchanges.
    Senator Isakson. Thank you, Mr. Cohen.
    Mr. Cohen. Thank you.
    Senator Isakson. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Hatch?
    Senator Hatch. Thank you.
    If I could just ask one other question. If you could give a 
``yes'' or ``no'' answer on this, I would appreciate it. We are 
less than 9 months away from open enrollment. With five crucial 
regulations yet to be finalized and no details from the data 
hub that will facilitate all eligibility determinations, it is 
hard to believe that the exchanges will be ready by October 
1st. You can see my skepticism there.
    I am concerned about it, but a critical piece to 
eligibility determinations is a sharing of information between 
agencies. Now, has CMS assigned service-level agreements with 
IRS, SSA, Homeland Security, and all of the other agencies that 
will be providing information to the data hub?
    Mr. Cohen. We have.
    Senator Hatch. You have? You have signed agreements with 
them?
    Mr. Cohen. Yes.
    Senator Hatch. Will each Federal agency be able to provide 
accurate data in real time to the Federal Data Services Hub by 
October 1st?
    Mr. Cohen. They will.
    Senator Hatch. All right. I just wanted to make sure that 
is--thank you. Thanks, Mr. Chairman.
    The Chairman. Thanks, Senator.
    Senator Grassley?
    Senator Grassley. Mr. Cohen, I would like to have you help 
me pinpoint a date, but, before I get to the question, I have a 
lead-in I want to read. A day is coming when we are going to 
find out who is right and who is wrong about premiums for plans 
sold through exchanges under the Affordable Care Act.
    Some of us think that there is going to be a real 
significant rate shock coming. The rate bands in the Affordable 
Care Act are too aggressive. The taxes and fees in the 
Affordable Care Act are too inflationary, and the timetables 
for readiness are very compressed. There have been independent 
actuarial studies in several States that suggest the rate shock 
will be severe: Indiana, up 95 percent; Maine, 89 percent; 
Ohio, 85 percent.
    Now, I know others would strongly disagree. They say that 
everything is going to work out all right. Of course, soon we 
will know who is right. Individuals are supposed to receive 
coverage, including even members of Congress. And many of the 
staff in this room will be covered under these exchanges by 
January 1, 2014.
    So individuals should be allowed to enroll this fall, 
starting October 1st. Thinking further about the timeline, 
States have to have all the rules from HHS to finalize exactly 
how an exchange will work. Once everything is finalized, only 
then can States ask insurers if they intend to participate and 
what rates they expect to charge for coverage.
    Insurers then need some time to make their decisions about 
rates. But that day is coming when insurers turn in their 
homework, when insurers say, these are the rates that we will 
charge, assuming they do choose to participate.
    Now, here is my question. Mr. Cohen, while I will not hold 
you to a specific date, to the best of your knowledge, when 
will we know what premiums will be in the exchanges?
    Mr. Cohen. Thank you, Senator. In the Federal marketplace, 
insurers will begin submitting their plans to us, including the 
rates, on March 28th. That opportunity will be open until April 
30th. We will then review those and make determinations as to 
which plans will be sold in the Federal marketplace by July.
    Senator Grassley. All right. When you are saying by July, 
there is time where the administration and Congress can react 
if it is obvious that premium rate shocks are so severe in the 
exchange pool of some States that the market will go into some 
sort of fatal death spiral at that time?
    Mr. Cohen. We will know by July what the bids are, yes.
    Senator Grassley. All right.
    Thank you very much, Mr. Chairman. That is all I have.
    The Chairman. Thank you, Senator.
    Next, we have Senator Casey.
    Senator Casey. Thank you, Mr. Chairman. I appreciate the 
opportunity to participate in this hearing. I think it is 
critically important that the chairman and ranking member have 
planned this hearing, because we have to make sure that this 
works. Even though we still have great divisions about health 
care in this country in terms of the approach to it, some 
supporting the legislation, some not, those of us who supported 
it have to be determined to get it right. So, Mr. Chairman, I 
appreciate you gathering us together for this purpose.
    Mr. Cohen, we appreciate your work and your service. I 
wanted to ask you about the particular situation that my home 
State of Pennsylvania faces where they have defaulted to a 
federally facilitated exchange, if that is the right 
terminology, or federally facilitated marketplace.
    But in that instance, I guess I have at least two questions 
in the time that I have. One is, what efforts can you 
undertake, or have you undertaken, or what can our expectations 
be, as it relates to the actions by the Federal Government to 
tailor a marketplace for Pennsylvania with all of the unique 
characteristics of one State versus the other, number one?
    I guess the second question is the question of 
communication: how are you communicating with consumers in a 
State like Pennsylvania?
    Mr. Cohen. Thank you, Senator. I appreciate the question. 
Since the Affordable Care Act was passed nearly 3 years ago, we 
have conducted a variety of stakeholder outreach consultations 
on implementation of the law, including meetings, calls, 
webinars, listening sessions, and, starting in March, we will 
begin a process to directly engage stakeholders in each of the 
States where CMS will be operating that federally facilitated 
marketplace.
    This is obviously an important opportunity for us to hear 
directly from individuals and organizations in each State.
    Senator Casey. Let me stop you right there. On 
stakeholders, what is the kind of rough outline of who that is?
    Mr. Cohen. So, we are going to begin with a very broad 
outreach: anybody who wants to come in, conference calls, and 
those sorts of things, and then we envision ongoing 
conversations in each State led by the CMS regional offices 
with our community, our consumer advocate community, to make 
sure that we are really getting the information that we need to 
operate the marketplace in the right way as it varies from 
State to State. We recognize that there are differences, 
obviously, geographically, demographically, in the insurance 
market, and so we recognize that it is a very important process 
for us to go through.
    Senator Casey. Your intention is to make sure it is 
tailored. Do you feel that you have the kind of flexibility and 
the resources to be able to do that?
    Mr. Cohen. We certainly have the flexibility, and we are 
going to use our resources as best we can to make sure that we 
are providing a marketplace that is suitable for each State.
    Senator Casey. On the communication part of this with 
regard to consumers, is that something you can comment on?
    Mr. Cohen. So I think that consumers are going to see in 
the beginning a campaign that is a media campaign that will be 
launched soon just to begin to increase awareness of the law 
and what the benefits are and what it can do for them. When I 
say ``media,'' I mean, of course, all sorts of media: social 
media, the traditional media.
    The purpose of that will be to try to drive people to 
Healthcare.gov, which really is the central source of 
information about the Affordable Care Act and the marketplaces 
in particular and will give people the information they will 
need to then come back in October when they can actually take 
action to get enrolled.
    In addition, we anticipate that these navigators are going 
to really play a crucial role in outreach to local communities, 
ethnic communities, communities with limited English 
proficiency, and the funding opportunity for navigator grants 
will be going out very soon. The first grants will be awarded 
in June.
    Senator Casey. My time is running out and I was late, so I 
do not want to go over time. What I will do is, I will send 
you----
    The Chairman. Go ahead, Senator, if you have a couple of 
more questions.
    Senator Casey. All right. Thank you, Mr. Chairman. That is 
nice to be able to have some extra time. I appreciate that.
    Just really one final question I was going to send you in 
writing, but I will ask it now. A great concern that so many of 
us have is making sure that, with regard to both Medicaid and 
the Children's Health Insurance Program, that every eligible 
child gets enrolled and that we do not have any problems with 
that. What can you tell me about that in terms of your efforts 
as the marketplaces are being implemented?
    Mr. Cohen. I think that one of the things that is very 
encouraging about that is that, when people come to either the 
website or sit across the table from someone in their community 
who is helping them, they can go through a single process that 
will determine whether they are eligible for Medicaid or CHIP, 
or whether they are eligible for subsidies to purchase coverage 
through the exchange. So, it is what we call ``no wrong door.''
    So all of the outreach and education that we will be doing 
will be geared toward getting everybody into the door, and then 
where they end up will be determined through the process of 
measuring what they are eligible for. But we will be looking at 
the entire community that we are trying to reach and the entire 
population that we are trying to get into coverage, and then 
they will be sorted out through the process of applying.
    Senator Casey. Thanks very much.
    The Chairman. Thank you, Senator.
    Before we turn to Senator Wyden, I have to leave. Mr. 
Cohen, I would like you to, maybe just for a minute here, 
discuss with me what benchmarks, data, dates, that you have in 
mind as you proceed and begin to implement the statute. What do 
you want to have accomplished? And I want data here. I do not 
want just goals. How much in terms of numbers, by what date, in 
what subject?
    Just give me those benchmarks. We need to know. I would 
like you to break it out in a good-faith way, basically the way 
that you are probably already implementing it. Maybe you have 
six, seven different subjects. You have dates, timelines by 
which you want X amount accomplished so we can measure to see 
whether we have or have not met those deadlines. I would like 
those to me and the committee by Tuesday when we get back after 
this next recess. Give me the list.
    I want to know what you aim to accomplish, by what date, 
during this next year, in each of those subjects. I want it 
quantified so that, on down the road, maybe 2 months later, we 
can look and see how we are doing. We want to help you, but I 
think this will help you, answering the question I just asked.
    We have to get moving here. We have to know what we are 
doing and what we are not doing. We cannot just talk. It is 
deeds, not words. If you could get that to this committee by 
Tuesday following, this coming Tuesday, close of business 
Tuesday, I think it is going to help us a lot here. Thank you.
    Mr. Cohen. Thank you, Mr. Chairman.
    The Chairman. Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman.
    Recently, Mr. Cohen, the IRS determined that affordability 
is going to be based on the cost of a worker's individual 
coverage, not the cost of family coverage. So we are going to 
have millions of spouses and dependents in a kind of regulatory 
no-man's land. During the health care debate, this issue was 
looked at, the whole question of affordability, particularly 
affordability for families, and a provision was added that 
would have allowed an employee to take their employer's 
contribution, either individual or family, and then be able to 
shop for a policy that best fit their needs at a price that 
they could afford.
    Now, this is no longer available. As of now, this is no 
longer available. So, come January of 2014, we are going to 
have millions of families--not my characterization, it has been 
in the New York Times, all kinds of other places--really 
pinched. They are really in this kind of no-man's land where 
they are unable to afford the family coverage offered through 
their employers and ineligible for subsidies that could be used 
by dependents on the exchange.
    What I would like to know is what you all are open to doing 
in terms of helping these people. This is not an abstract 
question; these are people who are going to get pounded here, 
middle-class families here, in a relatively short period of 
time. It seems to me, at a minimum, what you all ought to be 
doing now is looking at ways to give the States, through the 
exchanges, some flexibility to help people. Are you willing to 
do that?
    Mr. Cohen. Yes, we are.
    Senator Wyden. All right. Now, I would like you to get back 
to me in writing with respect to specific ways in which you 
would like to work with the States to help people. I am 
encouraged by your answer. I know that this is something that 
you probably did not know would come up today.
    But in effect, what we would be especially interested in is 
ways in which the State would allow an employee to take an 
employer's contribution to the exchange and be in a position to 
get more value for themselves and their family. Can you take a 
look specifically at that idea for me?
    Mr. Cohen. We would be happy to take a look at it. I do not 
have an answer for you today, but we will be happy to take a 
look at that.
    Senator Wyden. All right. How long do you think it will 
take for you to get an answer to me on that? Can you say within 
a month?
    Mr. Cohen. Oh, I would think so.
    Senator Wyden. All right. Very good.
    Senator Hatch. Has everybody had a chance to ask questions? 
Senator Roberts?
    Senator Roberts. Mr. Cohen, thank you for coming. Tough 
duty.
    Mr. Cohen. It was my pleasure, Senator.
    Senator Roberts. Stay in there.
    In many regulations implementing the PPAC statute, 
stakeholders are being given the minimum amount of time--
minimum, not maximum, minimum--to respond, 30 days, to 
sometimes hundreds of pages of regulations, often with many of 
these regulations being issued in the same week.
    I cannot go to a stakeholder meeting comprised of all of 
our providers without somebody picking up a piece of paper and 
saying, ``Senator, what about this?'' Then I do not know about 
it, they do not know about it, we have to ask, and we get into 
some real problems.
    In these instances, the administration has had months, if 
not years, to draft and review, and OMB is given months to 
review as well. Will future regulations give stakeholders more 
than a minimal amount of time to review? It has been suggested 
by other nominees before the Finance Committee that 60 days 
would be a more reasonable time frame.
    It used to be 30 or even 60 days, and then 90 if thousands 
of comments came in, to say this regulation does not work well 
for us, we can tweak it, we can do this, we can do that. Some 
would oppose it, but at least there was a time frame where you 
could then work the regulations to better fit all of the 
stakeholders and the providers.
    In addition, we are getting feedback that many stakeholder 
groups do not believe the administration will take into account 
their comments when issuing the final regulations. I am talking 
about the final regulations now, that is, the subject of this 
hearing. I thank the chair and the ranking member for holding 
this hearing.
    I would like to point out a letter I, along with many of my 
colleagues, sent to the Department of Health and Human Services 
and Treasury and the Department of Labor, outlining our 
concerns. In your response dated February 12th, the Department 
noted that they are reviewing these comments and will finalize 
the rule soon.
    I would also note that the submissions for these rules to 
OMB show that they were submitted and received by OMB on 
February 8th. Now, that tells me that you have in fact 
completed your review of the rules and are not still 
considering them. That careful consideration of thousands of 
comments was given at the most a little over 40 days to 
complete, and I can see why stakeholders are very skeptical of 
whom you are listening to and what you have to say.
    I would remind you that the traditional regulatory process, 
as described in both statute and executive order, calls for 
notice, comment, review, consideration of comments, and issuing 
of a final rule. What is being done to address this very 
troubling concern?
    Mr. Cohen. Thank you, Senator. I would make two points. I 
think, first of all, our process with respect to the policy 
that is being set forth in these rules has been to provide 
guidance bulletins ahead of time so that, before we even put 
out the proposed rules, we have gotten a tremendous amount of 
input from the stakeholder community with respect to them.
    So, as an example, the essential health benefits rule: we 
put out a bulletin well ahead of time. We got comments on the 
bulletin, and we incorporated those comments in what then 
became the proposed rule. In addition, I would say that, in all 
of the rulemakings that I have been involved with since I have 
been at CCIIO, we have very carefully considered comments we 
have gotten and, in many cases, have incorporated and made 
changes with respect to input that we have gotten from the 
stakeholder community. So I am disappointed that people are 
skeptical that we read them. We absolutely do. We do take them 
into consideration, and we have and will with respect to the 
rules that are becoming final now.
    Senator Roberts. This, I think, raises an important 
question. The departments implementing PPAC have often referred 
to the subregulatory guidance documents such as you describe--
the bulletins and the guidances and the postings on the 
website, the faxes, et cetera--to demonstrate stakeholder 
participation in the regulatory process. Here we have a 
question, and you are coming back with all of these bulletins 
and guidances and postings. I do not know who can keep up with 
all of that, but at any rate you are making the effort.
    But it raises several concerns. As subregulatory guidance 
does not hold the force of law, it generally does not reach, 
through notification and other means, the same amount of 
stakeholder participants and is outside the traditional 
regulatory process. That really can confound stakeholders with 
limited resources, both time and money.
    The rural health care delivery system does not have the 
folks out there to go through all of the bulletins, the 
guidances, the postings, the websites, and the faxes. 
Basically, we just have a situation where they cannot focus on 
what they need to focus on in regards to the regulatory 
mandates that they face.
    So the traditional regulatory process, as described in both 
statute and executive order, calls for notice, comment, review, 
consideration of comments, and issuing of the final rule.
    I think the administration is deviating severely from the 
normal rulemaking process, and it is a real problem with regard 
to the stakeholders. Now, I have made my speech, and I think 
you have responded. I am not sure we need to go into it any 
further. But this is a problem.
    Just as, in the State of the Union address, the President 
indicated that basically, if we have a situation where the 
obstreperous Congress, all of us combined, we do not buy his 
agenda and do it in a specific amount of time, a reasonable 
amount of time, he will simply issue executive orders and more 
regulations.
    Now, I will tell you what, that sent a chill through the 
entire health care industry, because we are drowning in 
regulations now, and, to my way of thinking, when you go into 
the subregulatory guidance documents as opposed to following 
the review and consideration of comments that is called for by 
executive order and statute--I know that it is convenient; I 
know that the regulations are so many and they are important 
and they are very comprehensive--that is a problem. So I would 
hope that we could get back to a more--just follow the law. 
Just follow the executive order and the statute.
    Mr. Cohen. Senator, I would just say that, in my 
experience, stakeholders have welcomed and are grateful for the 
guidance that we put out, the frequently asked questions, et 
cetera, that are intended to clarify. We are not making law in 
those documents, and we are very careful to use the regulatory 
process when it is called for and necessary.
    Senator Hatch. Thank you.
    Senator Carper, I think you are the last one.
    Senator Carper. Yes. Thanks so much.
    Mr. Cohen, welcome. I just came from a press conference 
over on the House side with the head of GAO. They just released 
their high-risk list, the high-risk ways for wasting money in 
the Federal Government, and there were a lot of good ideas of 
things we can do we ought to put on our to-do list.
    I quoted Mike Enzi, a venerable former mayor of Gillette, 
WY, who sits right over here next to Mr. Roberts. I quoted him 
again on the 80/20 rule. The 80/20 rule is Mike Enzi's--I do 
not know if he wrote it, but it is a great rule. It goes like 
this: we agree on 80 percent of the stuff, we disagree on 20 
percent of the stuff.
    What he says is, we ought to focus on the 80 percent where 
we agree, get that done, and set aside the other 20 percent and 
come back to that another day. I think 80 percent of the 
people--I think probably close to 100 percent of the members of 
the Senate and this committee--agree that one of the keys to 
bringing down costs and getting us better health care results 
for less money is to create large purchasing pools so that 
individuals, small businesses, families, even mid-sized 
businesses up to 100 or so employees, have the opportunity to 
really participate in a large purchasing pool like we do 
through the Federal Employees Health Benefit Plan, to get more 
competition, arguably better health care results, and lower 
administrative costs.
    It is a great concept, and we are going to give this 
opportunity to every State to set up their own large purchasing 
pool, called an exchange. They can run it themselves, they can 
have the Federal Government run it for them, or they can be in 
a partnership where we do it together. We have to do it right. 
We have to get it right, and there is a lot that lies on the 
administration as we implement the Affordable Care Act.
    Mr. Chairman, our congressional delegation--Senator Coons, 
Congressman Carney, myself with our Governor Jack Markell--are 
going to be holding a series of forums up and down the State. 
It is a little State, so it is not hard to do. We will have 
them on nights, we will have them on weekends, we will have 
them during recess periods, we will have teleconference calls, 
just invite the business community to join us in person or by 
phone to figure out, how is this going to work, how can we make 
it work for them, how can we make it work for their employees? 
But we need to make sure that, from the administration, we have 
regulations that actually facilitate systems, particularly 
computer systems, that make it possible for them to understand 
what is available here and to make sure we seize this 
opportunity.
    Let me just ask the first two questions. The first one is--
and I will ask you to be brief on this one if you will--how 
will the administration, how will the Department, be ensuring 
that businesses can comply with this new law? What are you 
doing? What can you be doing to better ensure that they can 
comply? Not just be dumbfounded by it, confused by it, but can 
actually comply?
    Mr. Cohen. Thank you, Senator. I think what you will see, 
beginning now and through the rest of the year until October, 
is a real outreach and education campaign to make sure that the 
Affordable Care Act and what it provides and what it requires 
is known out there in the community so that people understand 
what their obligations are and will be able to comply with it.
    Senator Carper. All right. I am going to drill down on this 
a little bit. How are you planning to test the computer systems 
for the exchanges to make sure that they work properly? Second, 
do you have a contingency plan to back up these computer 
systems when they run into glitches, and they probably will?
    Mr. Cohen. So, the answer to the first question is that 
there are a number of different computer systems that are being 
established to determine eligibility enrollment: the data hub, 
to verify information that is provided by people when they are 
applying; the system that will enable us to accept the issuer's 
plans and review those to make sure that they comply with the 
law and are able to be sold in the marketplace.
    Testing has already begun on a number of those and will 
continue throughout the spring and into the summer, and we will 
have all of that completed in time to operate by October 1st. 
We are looking at contingency plans for every eventuality.
    Senator Carper. All right.
    I like to quote, not just Mike Enzi, but I like to quote 
Albert Einstein. Some of you have heard me do this before, but 
Einstein used to say, ``In adversity lies opportunity.'' We 
have a huge adversity. We spend way more money on health care 
than any other country, as you know, and we do not get better 
results. This is like, Norway spends 50 percent less than us, 
and they cover everybody. We spend twice as much as the 
Japanese. They cover everybody, and they get better results.
    So there is great adversity here, but there is great 
opportunity here. If we do not seize the advantage of this 
opportunity to address it through setting up the exchanges, 
running them well in a cost-effective way, getting better 
health care results for less money, we have really missed a 
terrific opportunity. We cannot let that happen. I would just 
urge you and your colleagues--and I will be talking with the 
Secretary later today, Secretary Sebelius later today--just to 
sort of underscore that point.
    The last thing I would say to my colleagues is, some of us 
were supportive of the Affordable Care Act passing, some of us 
were not. I said from the start it is not perfect, but it is 
certainly better than what we have been doing, spending more 
money for health care, not getting better results, and not 
covering everybody. So, we have to do better than that. This is 
something that the Democrats and Republicans ought to be able 
to agree on. We ought to be able to agree with Governors and 
States to implement these exchanges, to implement them well.
    The key here: better health care results for less money. We 
can figure that out and implement it, particularly with respect 
to programs like Medicare and Medicaid where we know we need to 
do better. We know we need to reform those programs in ways 
that save some money, do not savage old people, and save the 
programs for the long haul. So we look forward to working with 
you. You just need to be on your A game. You need to be on your 
A game every day.
    Thank you, Mr. Chairman.
    Mr. Cohen. Thank you, Senator.
    Senator Hatch. Well, thank you, Senator. We appreciate you, 
Mr. Cohen. We appreciate you being here, and we look forward to 
seeing what you can do between now and October 1st.
    Mr. Cohen. Thank you.
    Senator Hatch. Thanks so much.
    Well, our second panel will feature Don Hughes, Advisor to 
the Office of the Governor of the wonderful State of Arizona; 
Christine Ferguson, Director of the Rhode Island Health Benefit 
Exchange; and Bettina Tweardy Riveros, who is Advisor to the 
Governor and Chair of the Delaware Health Care Commission.
    As a reminder, your written statements will automatically 
go into the record. If you could limit your opening statements 
to 5 minutes, we would appreciate it, but we are not going to 
be tough on that. So, it is up to you. We will start with you 
then, Mr. Hughes.
    Senator Carper. If I could, one of our committee witnesses, 
our third witness--I do not know if we are saving the best for 
last--but Bettina Tweardy was my deputy legal counsel, deputy 
policy advisor, in my second term as Governor. She was so 
smart, so able, so hard-working, and she still continues to 
serve the people of Delaware in a different role and for a 
different Governor. But it is great to see Bettina. We welcome 
her and the other witnesses. Thank you just for letting me say 
this. Happy Valentine's Day, Bettina.
    Senator Hatch. You were lucky to have him as Governor.
    We are happy to have you here.
    Ms. Tweardy Riveros. Thank you, Senator.
    Senator Hatch. We will start with you, Mr. Hughes, and go 
from there.

STATEMENT OF DON HUGHES, ADVISOR TO THE OFFICE OF THE GOVERNOR, 
                 STATE OF ARIZONA, PHOENIX, AZ

    Mr. Hughes. Thank you, Ranking Member Hatch and members of 
the Senate Finance Committee. Thank you for the invitation to 
discuss Arizona's experience in planning and designing a State-
based exchange and Governor Brewer's decision to defer to the 
federally facilitated exchange. My name is Don Hughes. I serve 
as Governor Brewer's Health Care Policy Advisor, and I am 
responsible for Arizona's health insurance exchange activities.
    Arizona's goal was to explore all options available to the 
State and to allow maximum flexibilities and options to the 
Governor with respect to the health insurance exchange. The 
State's analysis concluded that the least risky options were to 
defer to the federally facilitated exchange or to leverage our 
existing State systems and fill gaps with new development. Both 
options presented the lowest cost to the State and provided the 
greatest likelihood of meeting ACA timelines.
    Maximizing options was important to Governor Brewer as she 
explored ways to address the rising uncompensated care costs 
associated with the more than 1.2 million uninsured Arizona 
residents representing 19 percent of Arizona's population.
    The State's research indicated that once an exchange was 
fully implemented, 587,000 uninsured people would find coverage 
in either private health insurance or Medicaid. The potential 
impact on the uninsured and uncompensated care made pursuit of 
a State-based exchange attractive.
    Arizona intended to utilize as much flexibility as is 
afforded States under the Affordable Care Act and the exchange 
rules. The goal is to design the most free market-oriented 
health insurance exchange in the country. Exchange planning and 
design work operated under the following principles.
    First, build on Arizona's strong health insurance market; 
support the market facilitator approach; maximize consumer 
choice and competition; and impose minimal regulations and 
reporting requirements. With more than 35 health insurance 
companies actively writing in our small group market and more 
than 15 insurers actively doing business in the individual 
market, Arizona has a very healthy and competitive insurance 
market.
    No insurer has more than 24-percent market share. The 
exchange design that we were working on was intended to 
transfer the same level of competition and consumer choices 
that exist in the current insurance market to the exchange. In 
designing a State-based approach, leveraging existing State 
systems and filling the gaps with products developed by private 
sector vendors was determined to be the option that had the 
lowest costs, was most likely to be ready on time, and would 
provide Arizona with the most control over the design and 
operation of the exchange.
    For the past 10 years, the Arizona Health Care Cost 
Containment System (AHCCCS), Arizona's Medicaid agency, has 
operated a web-based application system called Health-e-Arizona 
to receive and process applications and renewals. AHCCCS 
receives more than 40 percent of applications and 50 percent of 
renewals online through Health-e-Arizona today.
    Leveraging Health-e-Arizona with cutting-edge technology 
from the private sector to fill in the IT gaps presented the 
best option to meet the goal of providing a first-class 
consumer experience in reducing the uninsured rate in Arizona.
    The Arizona health insurance exchange is being designed to 
be a fully integrated system that will allow consumers and 
small employers to find information, determine eligibility for, 
and enroll in Medicaid, CHIP, SNAP, TANF, and private 
individual insurance, including the Advanced Premium Tax 
Credits and small group insurance.
    Arizona also believed in working collaboratively with the 
insurance industry to ensure an open-market approach. If 
Arizona had moved forward with a State-based exchange, there 
would have been more than 100 qualified health plans 
participating in the individual exchange and the Small Business 
Health Options Program (SHOP). This level of competition would 
have helped keep premiums affordable and maximized the choices 
for consumers.
    Arizona exchange staffing consultants worked diligently on 
a State-based exchange model to maintain that as a viable 
option for policy-makers. However, too many uncertainties 
prevented Arizona from fully committing to a State-based 
exchange.
    On November 28, 2012, Governor Brewer notified the 
administration that Arizona would defer to the federally 
facilitated exchange. The delay in releasing all necessary 
exchange and Medicaid rules were significant factors in the 
Governor's decision.
    One large national insurance company commented that they 
would need 12 weeks from the time the rules were finalized to 
bring a product to market. The delay in issuing rules makes it 
difficult for insurers to meet the filing deadlines for 
qualified health plan (QHP) certification for the initial open 
enrollment period.
    Also, the delay in finalizing the HHS Notice of Benefit and 
Parameters Payment Plan for 2014 impacts the risk adjustment, 
risk corridors, and transitional reinsurance programs and may 
cause insurance actuaries to be more cautious in setting 
premiums for the upcoming year.
    Finally, the status of development of a number of Federal 
services that a State-based exchange would be required to use 
was also unclear to us. Those services included the Federal 
Data Services Hub, the Advanced Premium Tax Credit and Cost 
Sharing Subsidy Service, the Actuarial Value Calculator, 
Minimum Value Calculator, and the Modified Adjusted Gross 
Income Business Rules.
    Arizona is now working collaboratively with HHS on the 
development of the FFE and how it will work in Arizona. It will 
monitor its efficacy, including costs, operations, and ease of 
use. I am happy to answer any questions.
    Senator Hatch. Well, thank you, sir.
    [The prepared statement of Mr. Hughes appears in the 
appendix.]
    Senator Hatch. We will now turn to you, Ms. Ferguson.

 STATEMENT OF CHRISTINE FERGUSON, DIRECTOR OF THE RHODE ISLAND 
 HEALTH BENEFIT EXCHANGE, STATE OF RHODE ISLAND, PROVIDENCE, RI

    Ms. Ferguson. Senator Hatch, members of the committee, 
thank you for the opportunity to speak with you today to share 
our perspective from Rhode Island on the State-based health 
benefits exchanges under the Affordable Care Act.
    On September 19, 2011, Governor Lincoln Chafee issued an 
executive order that created the Rhode Island Health Benefits 
Exchange within our executive branch. The exchange is guided by 
a 13-member community advisory board which is overseeing 
exchange planning and development efforts.
    In June of 2012, I was appointed by the Governor to be the 
exchange Director. Since then, Rhode Island has continued to 
make progress in all areas of exchange benchmarks, with a 
rigorous inter-agency and stakeholder process that will 
continue to support the development and implementation of Rhode 
Island's exchange.
    Our exchange will serve two important purposes: first, it 
will provide a robust marketplace for all Rhode Islanders to 
identify health insurance options and, for those eligible, to 
purchase coverage. Second, the exchange will negotiate for 
high-quality, affordable insurance options on behalf of small 
employers and individuals. Our exchange stands on Rhode 
Island's strong history of health care advances and the support 
we have received from our congressional delegation.
    Senators Jack Reed and Sheldon Whitehouse have provided 
tremendous investment of time and support to ensure that Rhode 
Island is ready to implement the Affordable Care Act, and 
Congressmen James Langevin and David Cicilline have been 
unwavering in their support.
    Governor Lincoln Chafee and Rhode Island Lieutenant 
Governor Elizabeth Roberts, who is chair of the State's Health 
Reform Commission, have diligently coordinated all of the early 
work of our exchange, and the Lieutenant Governor continues to 
lead on broad health reform efforts.
    Our exchange also rests on decades of investment in Rhode 
Island's health care infrastructure, including the Rhode Island 
Quality Institute founded by Senator Sheldon Whitehouse to 
promote health information technology, and the Rhode Island 
Chronic Care Sustainability Initiative, launched in 2008 by our 
Health Insurance Commissioner, Christopher Koller, to promote 
the patient-centered medical home, among dozens of other strong 
health care initiatives.
    We have a robust Medicaid managed-care program with 
participation by both private and public sector programs, run 
by Steve Costantino. In addition, we have innovative activities 
on the part of our primary care providers and practices, our 
hospitals, and our insurers.
    As a result, when our Exchange Advisory Board came together 
in 2011 to create our vision, mission, and goals, they were 
building on a strong history of collaborative work and 
commitment to Rhode Islanders' health.
    The vision of the Exchange Advisory Board and the 
Governor's executive order is to support health reform efforts 
at the State and national level that provide Rhode Islanders 
well-being and provide increased access to high-quality, 
coordinated care at a reasonable, predictable cost.
    Our mission is to serve as a robust resource for Rhode 
Islanders and Rhode Island businesses to learn about and easily 
compare the quality and affordability of their health insurance 
options, enroll in coverage, and, if eligible, access the 
Federal tax credit for coverage.
    We have five guiding goals: the first is to improve the 
health of Rhode Islanders; second, to achieve near-universal 
coverage; third, to favorably impact health insurance cost 
trends; fourth, to favorably impact health care delivery system 
effectiveness and efficiency; and fifth, to add value to 
employer health insurance purchasing.
    Why did we decide to create a State-based exchange? As we 
collected input from stakeholders, we heard again and again 
that high costs and unpredictable annual increases have made 
health insurance coverage unsustainable for most employers and 
out of reach for many individuals, from entrepreneurs taking 
the plunge into new ventures to those who are working multiple 
jobs.
    We are building an exchange by Rhode Islanders for Rhode 
Islanders, one that benefits from and contributes to the work 
of other States but is created to meet Rhode Islanders' needs. 
The Affordable Care Act provides us with the tools to take 
advantage of Rhode Island's historic health care achievements, 
the strong relationships between our partners throughout the 
State, and our advisory board's carefully created vision.
    Rhode Island leaders felt that a State-based exchange was 
the best choice for us to carry out our goals. By purchasing 
for so many Rhode Islanders together, our exchange will give 
new power to small businesses and individuals in the health 
insurance marketplace by negotiating with health insurance 
carriers on their behalf.
    The work we are doing to create our exchange is 
complicated, and the timeline is pressing. Our very talented 
team is working 
24/7 as hard as they have ever worked to get this done by the 
October 1st deadline. We are confident that we will meet this 
goal, and we are pleased with the help provided to us 
throughout the process by HHS and CCIIO.
    In closing, Rhode Island has worked hard to overcome its 
economic challenges through these difficulties. Rhode Island 
has retained our tremendous medical talent with world-class 
universities and nationally recognized, innovative providers 
and leaders.
    Our exchange can act as a catalyst for the necessary 
changes in our delivery system and our insurance markets to 
increase quality and transparency, support innovations that 
will keep Rhode Islanders healthy and more productive, and keep 
costs down.
    The exchange also has the potential to improve the business 
climate in Rhode Island as we all work together to harness its 
possibilities. We are grateful for this opportunity to 
highlight our opportunities, and I thank you once again for 
inviting me to share this information.
    Senator Hatch. Thank you, Ms. Ferguson.
    [The prepared statement of Ms. Ferguson appears in the 
appendix.]
    Senator Hatch. Ms. Riveros, we will take your testimony.

 STATEMENT OF BETTINA TWEARDY RIVEROS, ADVISOR TO THE GOVERNOR 
  AND CHAIR OF THE DELAWARE HEALTH CARE COMMISSION, STATE OF 
                    DELAWARE, WILMINGTON, DE

    Ms. Tweardy Riveros. Thank you, Senator Hatch, Senator 
Carper, and distinguished members of the Senate Finance 
Committee. Thank you for the opportunity to report on 
Delaware's progress in establishing a State partnership health 
insurance exchange.
    Following a comprehensive stakeholder outreach process 
involving consumers, businesses, providers, brokers, carriers, 
and others, and a feasibility study, Delaware selected the 
State partnership exchange model due to concerns about the 
financial sustainability of a State-based exchange, given our 
State's small population.
    This model provided the best opportunity to keep the cost 
of health plans as low as possible while maintaining State 
influence over our insurance market and consumer outreach, with 
the ultimate goal of making quality health care affordable and 
accessible to all Delawareans.
    Beginning October 1st of this year, Delawareans will be 
utilizing the Federal exchange portal to enroll in the health 
insurance plan with coverage beginning on January 1, 2014. 
However, as a partnership exchange State, Delaware will be 
recommending health plans for certification and applying State 
certification standards, administering programs to help 
consumers understand the coverage options, and supporting our 
small business community.
    In Delaware, we are a State of neighbors, and we believe 
this model, the partnership model, provides operational 
efficiency and financial stability while being highly 
responsive to local needs and stakeholder input.
    As a partnership State, setting State-based qualified 
health plan certification standards and defining the consumer 
outreach strategy aligns the exchange with other State health 
policy goals, including ensuring access to care and coverage, 
and ensuring we have the workforce to provide that care, 
supporting quality and population health goals, and advancing 
critical cost-containment and payment reform initiatives.
    Foundational to all of these are supporting innovative 
technology and the DHIN--Delaware's Health Information 
Network--infrastructure created under the leadership of 
distinguished committee member and former Governor, Senator 
Thomas R. Carper.
    Delaware's progress on exchange establishment has been 
significant, and HHS has been very supportive and collaborative 
as we work together to launch the State partnership exchange 
model.
    In December, Delaware became the first State, true to form, 
conditionally approved to operate a partnership exchange. Today 
we can report that we are on track to complete State 
requirements necessary to support open enrollment on October 1, 
2013.
    In the plan management area, Delaware has defined our 
essential health benefits package, finalized State-specific 
criteria for certifying the qualified health plans, and will be 
ready to review and certify plans by late July and transmit 
approved plan information to the Federal exchange portal in 
time to support open enrollment in October.
    Delaware also has made significant progress on the consumer 
assistance front, including finalizing certification 
requirements for Delaware's consumer assistance provided 
through marketplace assisters, and initiating procurement for 
those marketplace assisters with programming and training of 
those individuals slated for April. On the start of open 
enrollment, these individuals will be ready to help consumers 
understand their responsibilities and the coverage spectrum 
available to them.
    Supporting Delaware's consumers also means supporting our 
businesses. Providing information and assistance to the 
Delaware business community and building on the strong broker 
and agent network is a key component of our consumer outreach 
strategy, and we will have significant activity, as Senator 
Carper noted, in the months to come.
    Delaware is proud of our exchange establishment progress to 
date. We also understand there is still much work to be done 
before October, and we appreciate the collaboration of HHS with 
Delaware, including supporting our State-based outreach 
strategy for consumer assistance and education.
    We continue to be eager for final HHS guidance on certain 
operational elements, including the final data collection 
templates that issuers will use to prepare and submit 
information for qualified health plan certification; how the 
multi-State plans will maintain consistency with State 
certification standards; and how the SHOP Exchange and 
navigators will refer small employers to agents and brokers.
    Thank you for this opportunity to share with you Delaware's 
experience and progress on this important initiative and our 
shared goal of improved health for all Delawareans and 
Americans. Thank you.
    Senator Hatch. Thank you.
    [The prepared statement of Ms. Tweardy Riveros appears in 
the appendix.]
    Senator Hatch. I appreciate the testimony of all three of 
you.
    Let me just ask a few questions. Mr. Hughes, it is clear by 
your testimony that Arizona was very close to establishing a 
State-based exchange and could have had one up and running by 
October 1st, indicating little political opposition to 
establishing an exchange.
    Now you, in your testimony, ended by stating that the 
decision to not establish a State-based exchange was made 
because of operational challenges, especially related to the 
lack of information coming out of HHS. You also note that the 
timeline established for plan certification did not provide 
issuers or Arizona enough time to be ready by October 1st.
    Do you have any doubts about the ability of all exchanges 
to be fully ready to go on October 1st, especially due to the 
fact that, even if a State-based exchange is fully operational, 
it will still rely on the capabilities of the Federal Data 
Services Hub to make eligibility determinations?
    Mr. Hughes. Senator Hatch, we were concerned about the 
uncertainty and the various moving pieces that are out there on 
where the Federal Data Services Hub and some of the other 
services are. We have made enough progress to this point that 
we are doing some initial testing with CMS on the Federal Data 
Services Hub.
    Our concern was, of the things that we could control, we 
would be ready on time, but there were simply things that were 
not in our control but were in the control of CCIIO or CMS, 
that we could not guarantee would be ready on time. It just 
seemed too risky for us to move forward.
    Our timeline--if we had moved forward with a State-based 
exchange for accepting applications for qualified health 
plans--was, we would have accepted applications beginning 
January 2nd and concluded accepting applications by the end of 
March, giving us 2 months or 3 months to work with the 
carriers, to ensure that their applications were complete, and 
that they were ready to go. Rates would have been filed in May.
    We felt that gave us sufficient time and gave the carriers 
sufficient time to move forward with qualifying for a qualified 
health plan, but it all depended upon having the final rules 
done, the essential health benefits actuarial value rules, the 
market rules, and the others, otherwise they would not have had 
enough time to build their products and price their products in 
order to submit their applications to the Federal exchange or 
to a State-based exchange. That was one of the reasons why we 
decided to defer to the FFE.
    Senator Hatch. All right.
    Ms. Ferguson, have you experienced any challenge as a 
result of the administration's delaying the issuance of 
regulations?
    Ms. Ferguson. We were fortunate in that we were one of the 
very first States to get the planning money and the first State 
to get a 2nd-tier establishment grant, so we have been working 
closely with CCIIO and HHS from really the very beginning of 
the process. We made a calculation that we believe they will be 
able to get us what we need in time to get the work done.
    Senator Hatch. All right.
    Ms. Riveros, your testimony referenced the ability of 
Delaware to have influence over plan certification and consumer 
assistance standards as one of the reasons to go with a 
partnership exchange. The CMS guidance document on State 
Partnership Exchanges states that HHS ``will approve State 
partners to perform plan management or consumer assistance 
functions and retain authority over inherently governmental 
functions.''
    What authority does the State of Delaware retain when the 
administration has final say in all decisions that are 
inherently governmental functions, and could Delaware approve 
the sale of a health insurance product on the exchange without 
the express approval of HHS? What benefit does the partnership 
model provide to the State that the FFE does not provide, other 
than access to grant funding under section 1311?
    Ms. Tweardy Riveros. Senator, first, the State of Delaware 
cannot approve a health plan for sale on the exchange that does 
not meet the Federal certification requirements. However, as a 
partnership State, Delaware has the opportunity to set 
requirements at the State level that will align our State 
health policy goals across this exchange.
    For example, we have in our State certification 
requirements requirements for support for transition for those 
who move between commercial insurance plans and Medicaid. We 
have requirements to support our technology infrastructure, the 
DHIN, in our certification standards.
    And we have other certification standards. For example, the 
business community sought a requirement that we require any 
issuer selling on our exchange to also offer for sale a bronze 
level, or 60-percent, actuarial value plan so that they would 
have a low-cost alternative in the market. Those are examples 
of specific ways that the State partnership exchange lets us 
influence our market, lets us align our State health policy 
goals through the exchange.
    Senator Hatch. Well, thank you.
    Senator Carper, if I can, I have one more question to all 
three, and then I am going to turn the gavel over to you, 
because I have to leave.
    Senator Carper. It is a dangerous thing, turning the gavel 
over to me. [Laughter.]
    I will be on my best behavior.
    Senator Hatch. I am counting on that.
    Now, to all three of you, and let me start with you first, 
Mr. Hughes, we know that the law requires each exchange to be 
self-sustainable by January 1, 2015. Now, user fees had been 
proposed by States, and CMS has proposed a 3.5-percent user fee 
on all plans offered through the FFE.
    Can each of the panelists please tell me if your respective 
States analyzed the impact of a user fee on health insurance 
premiums? If so, detail the results of your analysis, if you 
can. I just think it would be good for the record to ask you 
that question. Yes, sir?
    Mr. Hughes. Thank you, Senator Hatch. We did an analysis as 
to what our State-based exchange costs would be, both the IT 
costs and all of the other associated costs, with running a 
State-based exchange. We had made the decision, if we were 
moving forward, that we would do a flat dollar-amount fee 
rather than a percentage amount.
    We felt that, based upon our enrollment projections over 
time, that would cover our costs. We were looking to keep the 
administrative fee as low as possible because it simply adds to 
the cost of the premium that a consumer or small employer would 
have to pay.
    In terms of the 3.5-percent assessment on insurance 
companies, that would be built into the premium and passed on 
to consumers. I have not seen a budget for the Federal 
exchange, so I do not know if that fee is going to cover the 
costs, because I do not know what their costs are going to be.
    That is a bit of a concern, that we have not seen a budget 
yet for what those costs will be and whether the 3.5-percent 
assessment on Arizona insurance policies will be kept within 
Arizona and pay for Arizona costs, or will it just go into a 
larger Federal budget that will pay for the entire cost of the 
25 States that are deferring to a Federal exchange.
    Senator Hatch. All right.
    Ms. Ferguson?
    Ms. Ferguson. We are in the midst of that analysis. We have 
a couple of different options in terms of approaches to 
covering the cost. We are happy to provide that analysis as it 
becomes available.
    Senator Hatch. That would be helpful.
    Yes, Ms. Riveros?
    Ms. Tweardy Riveros. In Delaware, we conducted that 
analysis in 2011 and early 2012. We analyzed the cost of a 
State exchange, a Federal exchange, and a partnership exchange, 
and we took a very serious look at our direct costs associated 
with operating a State-based exchange, especially in light of 
our low population.
    Given our low population and the risk of low enrollment in 
particular, when we looked at the numbers, frankly, there was 
significant risk that we could not be financially self-
sustaining, and that drove us to our decision to, among other 
reasons, support a State partnership exchange.
    Senator Hatch. Well, thank you.
    I am going to have to leave. You are the last person to 
question, so I will ask you to wrap up the hearing. But we are 
very happy to have the distinguished Senator on this committee. 
His experience as a Governor, his experience in many other 
ways, is just absolutely vital to this committee. I just really 
appreciate you being here, and I appreciate you.
    Senator Carper. Thank you. Thank you so much. It is my 
privilege to serve with you.
    Senator Hatch. Thank you all for being here. I just want to 
personally thank you all for helping us to understand this 
better. Thank you.
    Senator Carper. Thank you, Mr. Chairman.
    To our witnesses, thank you so much for joining us and 
sharing your testimony and responding to our questions. The 
record will remain open for, I think, about another 48 hours so 
that my colleagues who are not able to be here will have a 
chance to submit questions as well.
    I am the last Senator sitting, not standing, but do not 
take this as a sign that my colleagues are not interested, are 
not connected, and do not understand the importance of us 
getting the exchanges right in all 50 States. We have a number 
of staff members here, Senators' staff, both minority and 
majority staff here, and a lot of folks are watching this by 
closed-circuit television. So your message is getting out, and 
we will have an opportunity to ask some more questions, and I 
will have some as well.
    Right now, an Environment and Public Works hearing is going 
on. David Walker, the former Comptroller General of the United 
States, is sitting out there waiting to meet with me. The 
chairman of the House Committee on Homeland Security is waiting 
to meet with me in my hideaway right now, so there is a lot 
going on.
    That is just a sort of example of what all of us face here; 
it is rather frenetic. But I am delighted that you are here and 
especially delighted to see Bettina. I am grateful for the 
great work she has done for our State, not forever, but for a 
long time. So, thank you for that.
    Bettina referred to something called the Delaware Health 
Information Network, which I signed into law in my last term as 
Governor. I do not think I understood how important it was at 
the time, but it is becoming more important.
    Mike Leavitt, who was a former Governor from Utah, and 
Tommy Thompson, the Governor of Wisconsin, who later became 
Secretaries of Health and Human Services, were hugely 
supportive of our efforts in their roles as Secretary of Health 
and Human Services. Dr. Carolyn Clancy, who is going to be 
leaving us fairly soon in her service at the Department of 
Health and Human Services, has been a great supporter of our 
efforts. I would be foolish not to acknowledge those folks.
    Let me just ask you, if I could, Ms. Riveros, when you look 
at what we are doing in Delaware with respect to the Delaware 
Health Information Network, how does it help provide better 
health care outcomes for less money, and what pieces of that 
might be transferrable to other States to try to replicate?
    Ms. Tweardy Riveros. Thank you, Senator. The Delaware 
Health Information Network is a health information exchange. As 
Senator Carper noted, we have, frankly, led the Nation, under 
his leadership beginning in 1997, and we have had an active 
health information exchange operational for nearly 6 years as 
of May of this year.
    Having the health information exchange in Delaware enables 
health information from disparate health care providers all 
over the State, and frankly potentially across our State 
borders, to be aggregated and available at the point of care, 
enabling coordination of care that is so difficult to achieve 
right now and is so foundational to the cost savings and the 
reduced costs and improved quality of care that we all seek to 
deliver.
    So having that health information exchange infrastructure, 
frankly, is like our highways are to transportation. It enables 
the transfer of data. But beyond that, it also enables us to 
better understand what the patient needs, what they have 
already had, whether they have already had an MRI 2 weeks ago 
and they do not need another one, so we can reduce costs in 
that way.
    It enables us to build on that foundation and develop new 
innovations that can ensure that we are bringing best practices 
to the point of contact and delivering that care to those 
patients. It also provides support for the payment reform 
models. When all of us speak about payment reforms and how we 
actually reduce the cost of care and get better quality 
outcomes, we talk a lot about delivering value, we talk a lot 
about improving outcomes, and having outcomes-based 
reimbursement structures.
    But we cannot have those reimbursement structures if we do 
not know how we are getting to the best outcomes, so the DHIN 
technology infrastructure actually provides a very solid 
foundation to support the data and analytics works that can, 
not only support care coordination, but also the payment reform 
models and outcomes-based reimbursement models. So those 
learnings are all transferrable, I would say, to other States, 
and certainly we are more than welcome to share our experience 
with those other States.
    Senator Carper. Please.
    Ms. Ferguson. Senator----
    Senator Carper. I am going to ask you to be brief, because 
I have all those other things going on, please. Jump right in, 
though.
    Ms. Ferguson. I just would be remiss if I did not, in the 
competitive arena that we are in in health care, support the 
fact that Senator Whitehouse originated our health information 
technology exchange in Rhode Island, the Rhode Island Quality 
Care Institute. So, as you are talking with him, I think 
everything that Ms. Riveros talked about is exactly the same 
benefit that we are seeing in Rhode Island, and I think we 
started at right around the same time.
    Senator Carper. You just never know what is going to come 
out of those little States, you know?
    Ms. Ferguson. Yes, I know.
    Senator Carper. That is good.
    Ms. Ferguson. We need to over-achieve.
    Senator Carper. That is great. Thank you for saying that.
    We are blessed in our State, as all States are, with an 
entity that is part of the health care delivery system that is 
supported by Democrats and Republicans, whether the President 
is George W. Bush or happens to be Barack Obama. I think most 
of us support the exchanges; God knows I do.
    But the other thing is the federally qualified community 
health centers. I think they are just a great way to try to get 
better health care results for less money, to ensure that we 
address the needs of the least of these, but in a cost-
effective way.
    I would ask you if I could, Chairwoman Riveros, could you 
just explain for us, just very briefly, how the federally 
qualified community health centers in our State--how they 
interact, or how do you expect that they will interact with our 
exchanges. Have you all given that much thought? If you have, 
any thoughts you have would be much appreciated.
    Ms. Tweardy Riveros. Yes, Senator. In Delaware, we have a 
very strong federally qualified health center network. In fact, 
we recently opened a new center, as the Senator knows. So, when 
we see the present uninsured Delawareans in our State--we have 
a little over 100,000 uninsured Delawareans--and we look at the 
opportunities to provide them subsidies through the exchange 
and the opportunities afforded through the expansion of 
Medicaid, we definitely see that a significant number of those 
individuals will potentially be served by our federally 
qualified health centers. In fact, we have reached out to them 
and spoken to them about their need to really ramp up and be 
able to continue to support that newly insured population. So 
they play, I would say, a critical role in our health care 
delivery system.
    In many ways, they have already developed the medical home 
models that we all talk so much about and are already working 
under those models. In fact, one of ours, West Side Healthcare, 
has been certified as a health home. So to me, they will be 
responsible for delivering care, and they have been successful 
in doing it in a cost-effective manner, and they will provide 
the capacity that we need to absorb this newly insured 
population.
    Senator Carper. All right. Thank you for that.
    To each of you, Mr. Hughes, Ms. Ferguson, to Chairwoman 
Riveros, it is good to see you on this special day. February 
14th comes around once a year. Since I get to be chairman, I 
get to do one of the things I most like to do, and it is to 
close a hearing with a musical reference. I was thinking, what 
could I possibly say on Valentine's Day that might be 
appropriate for this hearing?
    The words of a couple of British guys, British lads named 
Lennon and McCartney, come to mind. I am not sure which album, 
whether it was the White Album or maybe Abbey Road, but the 
last words of the album go something like this--and this is 
really good for Valentine's Day: ``And in the end, the love we 
take is equal to the love we make.'' I think one of the best 
ways to show the people of this country that we love and care 
for them is to make sure they have access to good health care, 
and we have an obligation to our taxpayers to make sure that we 
do it in a cost-effective way.
    With that in mind, Happy Valentine's Day. This hearing is 
adjourned.
    [Whereupon, at 11:35 a.m., the hearing was concluded.]


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