[Senate Hearing 113-311]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-311
 
                   THE POWER OF TRANSPARENCY: GIVING 
                  CONSUMERS THE INFORMATION THEY NEED 
          TO MAKE SMART CHOICES IN THE HEALTH INSURANCE MARKET 

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

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 27, 2013

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation


                               ----------

                         U.S. GOVERNMENT PRINTING OFFICE 

88-434 PDF                       WASHINGTON : 2014 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001



       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman
BARBARA BOXER, California            JOHN THUNE, South Dakota, Ranking
BILL NELSON, Florida                 ROGER F. WICKER, Mississippi
MARIA CANTWELL, Washington           ROY BLUNT, Missouri
FRANK R. LAUTENBERG, New Jersey      MARCO RUBIO, Florida
MARK PRYOR, Arkansas                 KELLY AYOTTE, New Hampshire
CLAIRE McCASKILL, Missouri           DEAN HELLER, Nevada
AMY KLOBUCHAR, Minnesota             DAN COATS, Indiana
MARK WARNER, Virginia                TIM SCOTT, South Carolina
MARK BEGICH, Alaska                  TED CRUZ, Texas
RICHARD BLUMENTHAL, Connecticut      DEB FISCHER, Nebraska
BRIAN SCHATZ, Hawaii                 RON JOHNSON, Wisconsin
WILLIAM COWAN, Massachusetts
                    Ellen L. Doneski, Staff Director
                   James Reid, Deputy Staff Director
                     John Williams, General Counsel
              David Schwietert, Republican Staff Director
              Nick Rossi, Republican Deputy Staff Director
   Rebecca Seidel, Republican General Counsel and Chief Investigator



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 27, 2013................................     1
Statement of Senator Rockefeller.................................     1
Statement of Senator Thune.......................................     3
Statement of Senator Nelson......................................     5
Statement of Senator Pryor.......................................    33
Statement of Senator Cruz........................................    35
Statement of Senator McCaskill...................................    36
Statement of Senator Schatz......................................    39

                               Witnesses

Lynn Quincy, Senior Policy Analyst, Consumers Union..............     5
    Prepared statement...........................................     7
Michael A. Livermore, Executive Director, Institute for Policy 
  Integrity, New York University School of Law...................    12
    Prepared statement...........................................    14
Margaret O'Kane, President, National Committee for Quality 
  Assurance......................................................    18
    Prepared statement...........................................    20
E. Neil Trautwein, Vice President and Employee Benefits Policy 
  Counsel, National Retail Federation............................    25
    Prepared statement...........................................    27

                                Appendix

Response to written question submitted to Lynn Quincy by:
    Hon. John D. Rockefeller IV..................................    47
    Hon. Amy Klobuchar...........................................    47
Response to written question submitted by Hon. Amy Klobuchar to 
  Margaret E. O'Kane.............................................    48


                   THE POWER OF TRANSPARENCY: GIVING
                     CONSUMERS THE INFORMATION THEY
                   NEED TO MAKE SMART CHOICES IN THE
                        HEALTH INSURANCE MARKET

                              ----------                              


                      WEDNESDAY, FEBRUARY 27, 2013

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m., in 
room SR-253, Russell Senate Office Building, Hon. John D. 
Rockefeller IV, Chairman of the Committee, presiding.

       OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 
                U.S. SENATOR FROM WEST VIRGINIA

    The Chairman. The hearing will come to order. And we--
please forgive us; we were having a little bit of fun up here. 
It doesn't happen much around here, you know? You've got to 
take advantage of it when you can do that.
    Almost 4 years ago--that being 2009, I was good at math--
this committee held a hearing on many challenges that consumers 
faced when trying to buy health insurance. And we spent a lot 
of time in this committee on the health insurance industry and 
healthcare. And at that hearing, we heard that shopping for 
health insurance was frustrating, confusing, and stressful. 
Consumers had no really easy way to find out what they were 
about to get. And then, one of the problems was that, under the 
old system, what the insurance company sent them was what they 
had to take before--well, they had to buy the insurance first, 
you see, and then they got the information about what they just 
bought. And that wasn't really smart.
    So, consumers didn't have any easy way to learn, or 
compare, which is the main thing, different healthcare plans. 
And that's the whole point of this. I mean, we're heading into 
a new era, 2014 almost on us. They could get slick marketing 
material from the insurance companies, which would say all 
kinds of things, but they couldn't get straight answers about 
the services a health insurance plan did, or did not, which is 
just as important, cover.
    When they asked for further information about health 
insurance plans, consumers usually got bulky disclosure 
documents. We--I was hoping we'd have a lot of bulky disclosure 
documents around here so everybody could look at them. We 
don't? I don't want it; I've already seen it. But, it's a trip. 
Some of these 100 page--consumers would get a--100 page 
explanations of what they had already paid for and, therefore, 
were going to have to have.
    So, they couldn't compare. They got their materials, but 
they couldn't get straight answers. And when they asked for 
further information about health insurance plans, consumers 
usually got these bulky things. And something which makes a 
point with me, you know, there's a fine print which can 
actually drive you crazy. That's the fine print which the 
insurance companies used. I mean, you take your Magellan 
magnifying glass and put it right down there, and you can just 
barely catch the word. And there was no standard terminology in 
health insurance. For example, ``copay,'' 
``hospitalizations''--well, we all know what that means. No, we 
don't. It varies, according to what the insurance plan might 
be. ``Out-of-pocket limit,'' what does that mean? Well, it 
meant many different things. So, consumers were kind of in the 
dark, and that's exactly where the health insurance companies 
wanted to keep them. And I'm not trying to be cynical about 
this, but it was--we had a fellow, named Wendell Potter, who 
testified, sat right there, Mr. Livermore, and he said that 
they did this purposely; they purposefully made things small, 
hard to read, long, legalese, healthcarese, so that people 
would just get discouraged from plowing through, and, 
therefore, would just go ahead and buy the product.
    Mr. Potter told us that the industry's goal was to make 
their disclosure materials so impenetrable and confusing that 
consumers would give up and throw them away.
    Now, as long as consumers couldn't understand what the 
policies--how they work, they wouldn't understand the bad deal 
they might be getting. Maybe they weren't, but maybe they were. 
They couldn't know.
    While the market we've heard about in 2009 was profitable 
for health insurance companies, it was a disaster for families. 
And that's all well documented, and we've done that.
    Consumers assumed that, if they paid their health insurance 
premiums every month, they were protected. I would have assumed 
that. I would have assumed that. It's the way America works. 
Only too late would they discover that the fine print in their 
health insurance plans stuck them with thousands of dollars in 
unexpected medical bills. A complicated pregnancy, a cancer 
diagnosis, or even a broken limb, could push families well 
beyond their budgets. In fact, medical debt had become the 
leading cause of personal bankruptcy filings. We all know that. 
That's been the case for years.
    So, after hearing too many of these stories, some of us got 
serious about bringing more transparency in the health 
insurance market. So, we created a clear labeling requirement 
in the Affordable Care Act, or the--you know, the--the Act, the 
healthcare act, Obamacare, whatever you want. So, we put that 
in there; they had to have clear labeling, just like when you 
look at how much caloric content, fat content, et cetera, you 
tend to get it on something that you buy. We required health 
insurance companies to clearly and accurately disclose to their 
customers that their--what their policies cost--that is now 
law--and what their services might cover. Instead of 20 or 40 
or even 100 pages--and I have all three in my back of my book 
here--disclosure documents--the law required insurers to give 
consumers about a 4-page document, a Summary of Benefits and 
Coverage, SBC; and it had to be written in plain English. And 
it is. And it had to be printed in font that customers, like 
me, could read, which was a strict requirement.
    The law also called for the development of industrywide 
standard definitions, so consumers could clearly understand 
words like ``copay'' or ``hospitalizations.'' They--in other 
words, what was true for one plan had to be true for another 
plan. Then you just put that into law, and then you try to 
enforce it; and presumably you can, although everything takes 
time. With clearly presented plan features describing--using 
standard terms--consumers could finally make apples-to-apples 
comparison--and that was good--between the health insurance 
projects--products, and find the one that best met their health 
coverage needs.
    To help consumers understand how the policies would work in 
a real-life situation, the law also required insurers to give 
example of how their plans would cover the expenses of major 
health events, such as having a baby or treating a chronic 
disease, like diabetes. And then breast cancer comes into our 
discussion today, because people can identify--and you can see 
it in some of these plans, when you get them--how much 
individual--for, say, breast cancer, or for diabetes 2--I mean, 
what, exactly, are you paying? What, exactly, are you paying? 
It's listed, and added up.
    So, after extensive discussion and consumer testing, 
insurance companies began issuing SBCs in the fall of 2012. 
While there may be room for improvement--and there is--these 
forms represent a major step forward. I'm actually very happy 
about this, because it helps consumers make informed judgments, 
which they need to do.
    So, with this new transparency, health insurance companies 
have a new incentive, to compete on the value of their 
product--the value of their products--and on their--not on 
their ability to confuse people.
    So, in closing, our witnesses today are going to tell us 
about how the SBC was developed and what they think of the SBC 
as a tool for creating transparency and improving consumers' 
health plans, and also how they think it could get better. I've 
got a bunch of ideas on that; you probably have more. We need 
to--while we're in the mood to get this SBC going, and while 
companies are adjusting to it, let's make it as helpful as 
possible to the consumer.
    My honorable Ranking Member.

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman, for holding this 
hearing.
    I appreciate all the witnesses who are here today to 
provide testimony. Thank you for being here.
    And, as the Chairman has mentioned, today's hearing follows 
hearings this committee conducted in 2009 which explored the 
connection between how health insurance companies share 
information about the benefits and coverage of their plans and 
the ability of consumers to make informed choices in the 
marketplace.
    Mr. Chairman, I applaud your dedication to these issues.
    Anyone who has had to compare healthcare plans and make 
decisions for themselves or their families likely shares the 
goal of improving the transparency and clarity of the plans' 
descriptions, particularly in the individual and small group 
markets.
    We're here to examine how healthcare plans share 
information with consumers in the health insurance market, and 
what changes have been made since 2009 specifically with regard 
to the implementation of the Summary of Benefits and Coverage 
provision, or SBC, which was championed by the Chairman.
    Since 2009, the health insurance landscape has changed 
dramatically. Some changes, like the requirement that health 
insurers provide standardized statements of benefits and 
coverage, we hope are for the better. It's no surprise that 
Americans appear to embrace the idea that health insurance 
companies should provide easy to understand plan summaries.
    Polling by the Kaiser Family Foundation in 2011 showed that 
nearly 84 percent of respondents in its tracking poll held, 
``very favorable'' or ``somewhat favorable'' views on this 
idea.
    As we explore the SBC today, which has yet to be fully 
implemented, it's my hope that the Committee will find that 
actual users' experiences are likely to match consumers' high 
expectations.
    Health insurance is complicated, given the many variables 
that influence the actuarial assessments upon which coverage 
and premiums are based. Provisions, such as the SBC, should 
help simplify the process, but, at the same time, they must be 
implemented in a way that provides an accurate picture of what 
consumers can truly expect. The goals of clarity and 
transparency are goals that we all share, but we should not 
underestimate the ability of the government to implement good 
ideas in ways that create additional confusion for consumers.
    While some provisions in the healthcare law offer promise, 
I am concerned that they pale against the backdrop of unwelcome 
changes we have yet to fully realize. I'm especially concerned 
about how the multitude of regulations mandated by the 
Affordable Care Act will affect premiums. A recent study by 
Oliver Wyman found that the President's health law will greatly 
increase the cost of insurance for those in the individual 
market by an average of 10 to 20 percent.
    Taken as a whole, the regulatory burden of the Affordable 
Care Act is crushing. Since its enactment, there have been more 
than 18,000 pages of regulations issued. The SBC provision is 
just one small part of this, and it's my hope the discussion 
today will provide an opportunity to explore ways in which we 
can increase its utility. But, as we seek to protect consumers, 
we cannot ignore the larger law's likely impact on premium 
increases. Perhaps our laws, like our health plans, should come 
with a straightforward summary of their likely cost and 
benefits to taxpayers; I think that would be refreshing, as 
well.
    So, I want to thank you all for being here. I look forward 
to hearing your testimony and the opportunity to interact with 
you, in some questions, and get your perspective on the SBC.
    Thank you, Mr. Chairman.
    The Chairman. I want to thank my Honorable Ranking Member, 
and beg his indulgence, because I asked Senator Nelson if he 
wanted to speak, which he has absolutely no right to do, under 
our rules, as well established, but he said he wanted to say 20 
seconds of nice things about me.
    [Laughter.]
    The Chairman. So, I decided----
    Senator Thune. We'd better indulge that.
    The Chairman. What I--that was my thinking.
    [Laughter.]
    The Chairman. The Senator from Florida.

                STATEMENT OF HON. BILL NELSON, 
                   U.S. SENATOR FROM FLORIDA

    Senator Nelson. Mr. Chairman, Mr. Ranking Member, I did 
want to say some nice things about you, because it is the 
passion that you continue to carry, from being one of the 
coauthors of the Affordable Care Act, that you bring to the 
chairmanship of this committee in such things as the hearing 
today, how to make it better.
    With your indulgence, I have the privilege of chairing my 
first hearing, in the Aging Committee, of which the subject 
matter is how to improve the healthcare bill that was passed 
back in 2009.
    So, Mr. Chairman, I want to thank you for your continuing 
passion.
    The Chairman. Senator Thune, he did overrun his time a bit.
    [Laughter.]
    The Chairman. But, I think that, in the spirit, we should 
be grateful.
    Senator Thune. That's right. Unanimous consent, Mr. 
Chairman, that he be allowed to use as much time as he already 
has used.
    [Laughter.]
    The Chairman. OK.
    Now our panel: Ms. Lynn Quincy, who's the Senior Policy 
Analyst of the Consumers Union--and you're smiling, which is 
good, because you'll be first up; Mr. Michael Livermore, 
Executive Director, Institute for Policy Integrity, New York 
University School of Law; Ms. Margaret--a.k.a. Peggy--O'Kane, 
President, National Committee for Quality Assurance; and Mr. 
Neil Trautwein, who's Vice President, Employee Benefits Policy 
Counsel, of the National Retail Federation.
    So, please give your testimony, and then we'll have 
questions for you.

  STATEMENT OF LYNN QUINCY, SENIOR POLICY ANALYST, CONSUMERS 
                             UNION

    Ms. Quincy. Senator Rockefeller, Senator Thune, and members 
of the Committee, thank you so much for having me here today. 
I'm absolutely delighted, on behalf of consumers everywhere, to 
come and talk about the Summary of Benefits and Coverage.
    I think we can all agree, health insurance is necessary for 
the health and financial security of American families. What's 
more, consumers must be fully informed about how their health 
insurance works, as has already been referenced.
    We do not want them out in the marketplace, shopping with a 
blindfold on. And I'm afraid that's a little bit too common, 
still. The Summary of Benefits and Coverage goes a long way 
toward taking off the blindfold and helping them understand 
their coverage options.
    Today, we're releasing a nationally representative survey 
that shows how the Summary of Benefits and Coverage fared in 
the marketplace last fall. This is our first experience with it 
out in the marketplace, and I'll share a few findings with you. 
We also have evidence from pretesting of the form that was done 
by Consumers Union and by health plans when it was being 
developed. And, taken together, we have a really rich body of 
evidence, which says how consumers respond to this form. And 
I'd love to share just a couple highlights, because they're all 
good.
    These are just the very--there we go--it's a very visual 
form, so we've got to look at it while we're talking about it. 
Here are just a few highlights from all of this evidence. One, 
consumers love the fact that they can line up plans from 
different carriers or different employers and compare them, 
apples to apples. This is a big deal for them.
    They are very reassured by the element that says why this 
matters, because they aren't sure why different features 
matter. They really need help understanding how these important 
cost-sharing features work, and whether or not it's important 
to pay attention to them.
    They really like having exceptions to coverage all in one 
place. It helps alleviate some of the worry they feel about the 
fine print that Senator Rockefeller referred to.
    They--but, what proved transformational, when we did our 
testing, is this element: the coverage example. The coverage 
example--in this case, it's a medical scenario of having a 
baby--tells consumers three things that they've never seen 
before.
    One, how much does healthcare cost? Well, they don't know; 
and so, they don't know how much insurance they need. The 
coverage example takes care of that problem.
    It shows a bottom line for how much they would pay. That's 
another thing they don't know, because consumers find it very, 
very difficult to roll up all those disparate cost-sharing 
provisions, like benefit limits and annual limits and out-of-
pocket maximums. It's pretty high-level math.
    And third, and perhaps most surprising, it shows what the 
plan pays. And here--this shows the real value of consumer 
testing. That may not seem important; it may seem like it's 
simply a residual. Well, it's not. It reminded them of the 
importance of insurance coverage and the fact that an 
unexpected medical event might happen to them, and that they, 
if they have coverage, even if it has what seemed like a high 
deductible, they're still getting a benefit, because they can 
see the number that represents what the health plan paid on 
their behalf. And perhaps you'll recall that traditional health 
plan materials don't actually include that information.
    So, this was enormous. And it's a wonderful tool in your 
policymakers' toolbox that you can be exploiting as we go 
forward with the SBC.
    I mentioned the survey in the fall. Here's the bad news. 
Only half of consumers, in the fall, who shopped for private 
health insurance coverage recalled seeing the SBC. We must do a 
much better job of raising awareness. And I suspect we need to 
do a better job of getting the health plans to comply with the 
requirements.
    The good news is, when they did see the Summary of Benefits 
and Coverage, the survey respondents told us that they viewed 
it very favorably, and they told us it was more helpful than 
any other form of health plan information that we gave them in 
a list. This is things like information you get from your 
employer, advice from a broker, et cetera. So, good news, 
except for the awareness factor.
    Going forward, I hope that we will do things to improve the 
SBC, maybe get it professionally designed, add more coverage 
examples, and all the other recommendations I included in my 
written testimony.
    I will stop there. Thank you so much.
    [The prepared statement of Ms. Quincy follows:]

       Prepared Statement of Lynn Quincy, Senior Policy Analyst, 
                            Consumers Union

 ``A Retrospective And Prospective Look At The Summary Of Benefits And 
                            Coverage Form''

Introduction
    Consumers Union, the policy and advocacy arm of Consumer Reports, 
\1\ appreciates this opportunity to provide testimony on the new health 
insurance disclosure--the Summary of Benefits and Coverage or SBC form.
---------------------------------------------------------------------------
    \1\ Consumer Reports is the world's largest independent product-
testing organization. Using its more than 50 labs, auto test center, 
and survey research center, the nonprofit rates thousands of products 
and services annually. Founded in 1936, Consumer Reports has over 8 
million subscribers to its magazine, website, and other publications. 
Its advocacy division, Consumers Union, works for health reform, food 
and product safety, financial reform, and other consumer issues in 
Washington, D.C., the states, and in the marketplace.
---------------------------------------------------------------------------
    The SBC provides a very important consumer protection. For the 
first time, consumers have a standardized disclosure that allows them 
to compare health plans, even plans from different carriers or 
different employers. This uniform, consumer-friendly information arms 
consumers to be better shoppers and, in turn, improves the insurance 
market place. What's more, a robust body of evidence shows this product 
is working as intended.
    My testimony describes this evidence and recommends some next steps 
for the SBC and for consumer disclosures more generally.
Brief Background
    The SBC requirement was included in the 2010 Affordable Care Act, 
based on legislation introduced earlier by Senator Rockefeller (D-
WV).\2\ The statute described not only what should be in the SBC but 
also legislative goals for the document:
---------------------------------------------------------------------------
    \2\ Informed Consumer Choices in Health Care Act of 2009.

   [Standards] shall ensure that the summary is presented in a 
        culturally and linguistically appropriate manner and utilizes 
---------------------------------------------------------------------------
        terminology understandable by the average plan enrollee.

   Uniform definition of terms so that ``consumers may compare 
        health insurance coverage and understand the terms of that 
        coverage (or exception to such coverage);

    Health insurance is costly and has profound implications for the 
health and financial security of America's families. Hopefully, all 
would agree it is important that consumers be armed with information 
that is understandable, reliable, allows them to divine how much 
coverage they are getting and can be readily compared across health 
plans. The SBC requirements were a major step forward in this regard.
    We all know that not every consumer disclosure works in practice as 
intended by legislators. Consumers Union thinks it is very important to 
directly assess the impact of required disclosures on consumers. Two 
things must be done to reliably conduct this assessment: (1) use 
independent, trained moderators to test disclosures with real consumers 
simulating real marketplace conditions as closely as possible; and (2) 
monitor how well the disclosure functions in the marketplace after roll 
out. As described below, for the SBC we have a robust body of evidence 
that shows this product is truly helping consumers and is as good or 
better than other information found in the market today.
Evidence from Testing
    For four years, I have served as a consumer representative with the 
National Association of Insurance Commissioners (NAIC), the 
organization tasked with initial development of the SBC form. NAIC 
reached out to a diverse group of stakeholders to develop the form, but 
did not plan any consumer testing. Nor did any of the Federal agencies 
tasked with writing the regulations on the SBC plan to conduct consumer 
testing.
    As a result, with the support of some generous foundations,\3\ 
Consumers Union stepped in to do two rounds of consumer testing on the 
prototype document.\4\ America's Health Insurance Plans and Blue Cross 
Blue Shield Association also tested the prototype document.\5\ This 
testing used either focus groups or cognitive interviews \6\ to learn 
how and when consumers would use the prototype forms. Participants were 
shown alternate versions of the form so that we could learn what was 
and wasn't working.
---------------------------------------------------------------------------
    \3\ We'd like to recognize: California HealthCare Foundation, 
Commonwealth Fund, Missouri Foundation for Health and NYS Health 
Foundation.
    \4\ Consumers Union and People Talk Research, Early Consumer 
Testing of New Health Insurance Disclosure Forms, December 2010 and 
Consumers Union and Kleimann Communication Group, Early Consumer 
Testing of the Coverage Facts Label: A New Way of Comparing Health 
Plans, August 2011.
    \5\ America's Health Insurance Plans Focus Group Summary, JKM 
Research, October 2010 and America's Health Insurance Plans [and] Blue 
Cross Blue Shield Association Focus Group Summary, JKM Research, May 
2011 [Report web links at the end of this testimony].
    \6\ Cognitive interviewing is a technique used to provide insight 
into learners' perceptions in which individuals are invited to 
verbalize thoughts and feelings as they examine information.
---------------------------------------------------------------------------
    Lending credence to the findings, these studies agreed with each 
other in almost all respects.
Health Insurance Is Complex--Consumers Dread Shopping
    In our testing, we started with open ended questions to assess how 
easy or difficult it was to shop for coverage prior to seeing the SBC. 
Few will be surprised that consumers find it very difficult to sort 
through health plan information. What's critical is to understand just 
how profound this difficulty is, and to develop the nuanced 
understanding of consumer difficulties that will allow targeted 
improvements to health plan information.
    In our testing, consumers told us that health insurance was one of 
the hardest things they shop for. In particular, they highlighted the 
difficulty of figuring out how much coverage is offered by a plan. 
Specifically, sorting through a plan's cost-sharing provisions was the 
most difficult aspect of health insurance shopping.
    Aside from premiums and copays, many cost-sharing concepts were 
unfamiliar to consumers. They don't know the meaning of terms like 
benefit limit, annual limit, or out-of-pocket maximums. Yet these 
concepts must be used, together with covered services, to understand 
the overall financial protection offered by a health plan.
    Testing allows us to take a nuanced look at these consumer 
difficulties. As an example, there are three separate things that 
consumers find difficult about coinsurance:

   Many are not sure who is responsible for paying the 
        indicated percentage. They are particularly confused when 
        presented with a coinsurance rate of 0 percent or 100 percent.

   Many consumers have poor numeracy skills. They have 
        difficulty applying a percentage to a dollar figure.

   They don't know what they have to pay. Coinsurance 
        percentages are applied to the contracted charge between the 
        health plan and the provider called the ``Allowed Amount.'' At 
        the point of shopping for a plan, or even when receiving 
        medical care, this is an unknowable number so there is no 
        bottom line for the consumer. Coinsurance of 75 percent might 
        be better than 80 percent coinsurance--depending on those 
        underlying contracted amounts.

    While not as frequent, consumers also had difficult understanding 
some covered service terms, like the difference between screenings and 
diagnostic tests.
    As a result, it is very difficult for consumers to figure out how 
much coverage is offered by a health plan. Even skilled consumers were 
leery of committing to a plan, because they were worried about the 
`fine print.' Due to these concerns, consumers told us they dread 
shopping for health insurance coverage.
SBC Helps Consumers
    While the SBC does not reduce the underlying complexity of health 
plans, testing showed it does help consumers make sense of the 
coverage. In particular, consumers told us they liked:

   Uniform layout of SBC--so they can line up forms for 
        different plans and compare them;

   ``Why this matters'' information--to provide a sense of how 
        important specific features are;

   Having ``exceptions to coverage'' all in one place; and

   Coverage Examples--for reasons discussed below.
Coverage Examples Were Transformational
    Coverage examples are a new feature, typically not provided in 
other plan summaries. For selected medical scenarios, these examples 
show how much the underlying health care costs and how much the plan 
would pay (Exhibit 1).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Testing revealed that these examples provided consumers with three 
pieces of information they wouldn't otherwise have:

   How much medical care costs--helps them to avoid 
        underinsuring

   A bottom line showing what the patient owed--rolling up 
        myriad cost-sharing provisions

   What the plan paid towards the services

    Testing showed us that this last item was much more important than 
one would guess. Traditional health plan disclosures focus on what the 
patient pays towards costs. After a long list of costs paid by patient, 
some consumers question whether or not health insurance is a good deal.
    Showing what the plan paid--especially for an expensive illness 
like cancer \7\--greatly increased consumers' willingness to make a 
health plan selection and increased their confidence in the 
selection.\8\ It reminded consumers of the benefit that they get from 
purchasing insurance.
---------------------------------------------------------------------------
    \7\ During development of the SBC, a breast cancer scenario was 
tested but not included in the initial requirements for the SBC. 
Because of the high charges associated with this scenario (roughly 
$100,000), this example generated the biggest consumer response among 
the three that were tested. HHS has committed to including up to four 
more coverage examples (for a total of six) in future revisions of the 
SBC.
    \8\ Consumers Union and Kleimann Communication Group, Early 
Consumer Testing of the Coverage Facts Label: A New Way of Comparing 
Health Plans, August 2011 and America's Health Insurance Plans [and] 
Blue Cross Blue Shield Association Focus Group Summary, JKM Research, 
May 2011.
---------------------------------------------------------------------------
    That's pretty powerful stuff!
Evidence from Polling
    Survey evidence reinforces the findings from consumer testing. One 
nationally representative survey found that an SBC type of benefit 
ranked the highest among the many provisions in the ACA--showing it is 
highly valued by consumers.\9\
---------------------------------------------------------------------------
    \9\ Kaiser Health Tracking Poll, November 2011.
---------------------------------------------------------------------------
    In order to see how well the SBC worked in practice, Consumers 
Union conducted our own nationally representative survey to see whether 
consumers used their new benefit when they shopped for private health 
insurance in the Fall of 2012--the first season when the benefit was 
available.\10\ We learned:
---------------------------------------------------------------------------
    \10\ L. Quincy, Early Experience With A New Consumer Benefit--the 
Summary of Benefits and Coverage, Consumers Union, February 2013.

   Awareness of the new benefit is low. Only about 50 percent 
        of consumers who shopped for or renewed private health 
        insurance coverage recalled seeing the SBC. Rates were even 
        lower for those who shopped for coverage on their own in the 
---------------------------------------------------------------------------
        non-group market.

   Among shoppers that did see the SBC, their impressions were 
        very favorable. Over 50 percent were very or completely 
        satisfied with the specific features of the SBC, with very few 
        expressing any dissatisfaction. When asked to rate the 
        helpfulness of the SBC against other common sources of health 
        plan information, the SBC was rated as helpful most often.

   Few consumers reported seeing the new feature called 
        ``Coverage Examples.''

    Anecdotal evidence from the fall suggests that insurers may need to 
make it easier for shoppers and current enrollees to access their SBC, 
particularly in the non-group market. They may also need to improve 
quality control to ensure that SBCs are released without errors.\11\
---------------------------------------------------------------------------
    \11\ Ibid. As an example, we saw SBCs where maternity was shown as 
``not covered'' in the coverage example but failed to be listed in the 
box describing non-covered services.
---------------------------------------------------------------------------
Who Should Bear the Cost of Complexity?
    Complexity has a cost. When consumers can't confidently compare 
their health plan options, they may find themselves underinsured or 
fail to complete enrollment. Under-insured consumers act like uninsured 
consumers--consuming too little care due to concerns about costs, 
possibly leading to poorer health and greater medical expenses down the 
road. And consumer confusion costs money, leading to great use of 
customer help lines.\12\
---------------------------------------------------------------------------
    \12\ UnitedHealth Group conducted a study which found that it 
clearer Part D and Medicare advantage products would save an estimated 
$4 million/year through reduced consumer calls. Industry wide savings 
would be greater and consumer satisfaction greater still (as not 
everyone who is confused call the help line).
---------------------------------------------------------------------------
    In their comments responding to the proposed SBC rule, several 
insurers were concerned about the cost of producing the SBC form for 
consumers. At the high end, they estimated it would cost a dollar per 
enrollee to produce the form.
    We can debate what the right number is but for us, it comes down to 
this: health insurance is necessary for the health and financial 
security of families. With something this important and this expensive, 
consumers should not be asked to shop with a blindfold on, that is, 
with an incomplete idea how much coverage they are getting.
    Hence, someone has to invest the time to craft the reliable, 
comparative information like that found in the SBC. From a societal 
perspective, it makes much more sense for the expert health insurer to 
do it once, providing a clear summary for all future shoppers for the 
policy. The alternative is for each individual consumer to slog through 
the same analysis--or giving up and going without coverage or buying a 
product that doesn't provide sufficient protection for their family.
    And while some insurers and employers have crafted nice looking 
summaries over the years these have one big problem--they don't use the 
same format. And some have failed to promote important loopholes in the 
coverage.
    An estimated 170 million consumers purchase private health coverage 
today. Many have a choice and would benefit from having a standard 
method of comparing plans:

   66 percent of employees whose employer offers coverage have 
        a choice of plans.\13\
---------------------------------------------------------------------------
    \13\ Decoding Your Health Insurance: The New Summary of Benefits 
and Coverage, Families USA, May 2012.

   Additionally, many employees have an alternate coverage 
---------------------------------------------------------------------------
        option through their spouse's employer.

   Consumers purchasing in the non-group market (approximately 
        19 million today) also face a choice of plans.

    Even those with only one coverage option from their employer 
benefits from having a consumer-tested, understandable summary that 
shows them how to use their health plan and stays that same over time, 
rewarding them for learning to use the Summary.
    You can't have a functioning marketplace until consumers are armed 
with the information they need to meaningfully compare products. Like 
the nutrition facts panel on food or the EPA's miles per gallon sticker 
on new cars, having a standard description across products greatly 
facilitates shopping and encourages competition based on the underlying 
value of the products.
Next Steps for the Summary of Benefits and Coverage
    Few consumer disclosures are perfect when initially rolled out. 
Evidence from testing and our survey suggest that the SBC could be 
improved in several ways. For example:

   Add more coverage examples, including at least one showing 
        an expensive illness like breast cancer.

   Ensure that the medical costs displayed in the coverage 
        examples represent realistic price levels. The current use of 
        Medicare pricing is too low.

   Test moving coverage examples closer to the front of the 
        form so that more consumers are aware of them.

   Add a row for premium back to the form. While the tested 
        versions contained this information, it was removed in the 
        final rule.\14\
---------------------------------------------------------------------------
    \14\ Opponents of premium information argued that it was not 
specifically required by statute but testing and common sense shows 
that it is integral to achieving the statutory goal of allowing 
consumers to ``compare coverage.'' The NAIC recommendations conveyed to 
HHS included recommendations for how to include premium information 
when necessary underwriting information was not available.

   Work with a designer to improve the look and feel of the 
        form.\15\
---------------------------------------------------------------------------
    \15\ While the NAIC worked very hard to provide their 
recommendations to the tri-agencies and successfully engaged a diverse 
group of stakeholders, a designer has not yet been engaged to 
professionally improve the look and feel of the form. As this report 
shows, alternate approaches to layout may further improve consumers' 
ability to use the form: http://www.naic.org/documents/
committees_b_consumer_information_110505_literacy_review.pdf

   Engage in activities to increase consumer awareness of the 
---------------------------------------------------------------------------
        form.

   Improve insurer oversight with respect to compliance with 
        the rule.
Require Consumer Testing and Monitoring of New Disclosures
    The value of consumer testing has been firmly established. 
Unfortunately, there is no uniform Federal policy with respect to pre-
testing and monitoring federally-required, consumer-facing disclosures. 
\16\ As a result, many disclosures are not tested or monitored to 
assess their consumer impact.
---------------------------------------------------------------------------
    \16\ Impressive work in this area includes CFPB's the ``Know Before 
You Owe'' design and testing efforts with respect to mortgage 
disclosures (http://files.consumerfinance.gov/f/201207_cf
pb_report_tila-respa-testing.pdf) and the redesign of the energy star 
label for appliances (http://www.energystar.gov/ia/business/downloads/
FTCs%20Appliance20Labeling%20Rule.
pdf).
---------------------------------------------------------------------------
    Going forward, consumer pre-testing and post-launch monitoring 
should be required and funded by the governmental entity that requires 
the disclosure. This effort should be commensurate with the number of 
consumers expected to view the disclosure. We recommend that all 
findings from monitoring and testing be made publicly available, to 
ensure independence and as an aid in the development of other materials 
for consumers.
    Thank you for the opportunity to comment on this very important 
consumer benefit.
            Submitted by:
                                               Lynn Quincy,
                                      Senior Health Policy Analyst,
                                                       Consumers Union.
Web Links for the SBC Testing Studies

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    The Chairman. Thank you very much.
    And actually, I was just thinking what Senator--Ranking 
Member Thune said--84 percent like it. I think it's, far and 
away, the most popular thing in the entire Act. Isn't that 
true? I won't go----
    Ms. Quincy. That's what the Kaiser poll showed.
    The Chairman. Now, Mr. Michael Livermore--as I indicated, 
Executive Director, Institute for Policy Integrity, New York 
University School of Law.

               STATEMENT OF MICHAEL A. LIVERMORE,

      EXECUTIVE DIRECTOR, INSTITUTE FOR POLICY INTEGRITY,

               NEW YORK UNIVERSITY SCHOOL OF LAW

    Mr. Livermore. Thank you very much, Mr. Chairman, Senator 
Thune. It's a wonderful opportunity to be here and have the 
opportunity to testify today.
    The center that I run at NYU focuses on the use of cost-
benefit analysis to evaluate government policy. That's really 
our area of expertise. And, as you know, cost-benefit analysis 
has been around for decades. And the question it asks is 
whether what we're buying for the public is worth the price tag 
that we're asking them to pay. That's the fundamental question.
    Today, of course, we're here to discuss provisions of the 
Affordable Care Act, requiring insurance companies to disclose, 
in a standard format, information to potential customers about 
their plans. The idea is to give consumers more information so 
they can make better health insurance decisions.
    Now, naturally, there's going to be some costs associated 
with standard disclosure. Agencies have estimated we're talking 
around $70 million per year, give or take. But, looking at the 
cost of the SBC, alone, without attending to the benefits, is 
economically meaningless. The question is not whether there are 
some costs, in an absolute sense, but whether the benefits 
justify those costs. And compared to the potential benefits of 
improved consumers' decisionmaking in the health insurance 
market, the costs of the SBC are going to be utterly swamped.
    Health insurance is a massive market in the United States; 
and changes to the way individuals, families, and businesses 
make decisions are likely to have significant consequences. 
Even a small improvement in consumer decisionmaking can 
generate very large economic returns in this market. More and 
better information means consumers can make better decisions, 
and it helps them find insurance products that fit their needs.
    There's a substantial body of research in behavioral 
economics, psychology, in cognition, about consumers make 
decisions. Based on this research, we can see that health 
insurance is a context that provides particularly high 
challenges to consumers. It involves long-term probabilistic, 
risk-based assessments of people's health, there's a long time 
lag between buying insurance and when you actually need to rely 
on it to pay for care--there can be. And you don't make these 
types of health insurance decisions very often, so you don't 
build the kind of experience base that allows you to make smart 
decisions.
    Each of these, alone, would make the decision difficult for 
consumers, but, collectively, they really create major 
challenges to consumers maximizing their benefit. So, this 
disclosure really helps, in that respect.
    A second benefit is the time-saving to consumers by having 
a standardized, comparative document that they can utilize. 
Time is money in the healthcare selection business, just as 
everywhere else in life. No one would characterize collecting 
and comparing insurance plans as a leisure activity. It's work. 
It's no fun. So, for time-pressed Americans, who have 
responsibilities to parents and families, communities, 
children, in addition to the hours they spend at work, anything 
that we can do, in public policy, to free up leisure time has 
real economic value.
    This information is also going to help value-conscious 
consumers get the most bang for their buck. And smarter, more 
informed consumers means that insurance companies will waste 
less time and money designing and promoting products that don't 
maximize values for consumers--the dollar--the value that they 
get for their dollar.
    Consumers who also understand their plans better are in a 
better position to take advantage of coverage that's offered, 
so they can access healthcare services when they need them, 
which is going to lead to better health. Especially for 
preventative care, we're talking about long-term savings for 
the American economy.
    Finally, a straightforward, standardized disclosure creates 
incentives for insurance companies to compete on price, 
benefits, and quality. So, by helping to improve consumer 
decisionmaking, the SBC creates a virtuous cycle, where 
consumers can make better choices between plans that are 
already on offer, but also creates incentives for insurance 
companies to provide better plans and better choices in the 
future.
    So, consumer disclosure has proven extremely important in a 
variety of different marketplaces. It's hard to imagine going 
to the grocery store and not being able to look at nutrition 
labels or buy a new car without having access to fuel economy 
labels. And health insurance, if anything, is a context that 
screams out for this kind of disclosure requirement. It's 
exactly the kind of context where consumers have the most to 
benefit.
    Now, one of the most promising features of the rule that I 
saw, the SBC rule, as it exists, is that the agencies have 
committed to continue testing and making the rule even better. 
There are many areas where improvement is certainly possible. 
Expansion of the coverage examples is one area that maybe we'll 
have an opportunity to discuss some more.
    But, in general, the rule does a very good job. It's a very 
first--good first cut, and it puts consumers in a much better 
position than they have been in the past.
    [The prepared statement of Mr. Livermore follows:]

    Prepared Statement of Michael A. Livermore, Executive Director, 
   Institute for Policy Integrity, New York University School of Law
    Mr. Chairman, thank you for the opportunity to testify before the 
Senate Committee on Commerce, Science, and Transportation today. My 
name is Michael Livermore and I am the Executive Director of the 
Institute for Policy Integrity at New York University School of Law. 
Policy Integrity is a non-partisan think tank dedicated to improving 
the quality of government decisionmaking through advocacy and 
scholarship in the fields of administrative law, economics, and public 
policy.
    The focus of my testimony is section 2715 of the Public Health 
Service Act, as added by the Patient Protection and Affordable Care 
Act, which requires uniform disclosure standards in providing benefits 
and coverage explanation to insurance applicants and enrollees. On 
February 14, 2012, a Final Rule was published by the Department of 
Health and Human Services, Department of the Treasury, and Department 
of Labor on Summary of Benefits and Coverage and Uniform Glossary (the 
SBC Rule) pursuant to this section.
    My testimony will make three basic points:

        Analysis conducted by the agencies prior to promulgation of the 
        final rule shows that the benefits of section 2715, which 
        included both improved consumer decisionmaking and improved 
        health outcomes, will outweigh the costs, likely by a 
        substantial margin.

        The substantive requirements of section 2715 and the SBC Rule 
        accord with available evidence on consumer decisionmaking. In 
        particular, the use of examples and the standardization of 
        disclosure of benefits and coverage information will empower 
        consumers to process information about plan alternatives to 
        make more informed choices that better match their risk 
        preference and long-term needs.

        The agencies have committed to continually testing, updating, 
        and improving the SBC Rule, which will lead to increased 
        performance and greater net benefits over time. Because many 
        regulatory contexts involve conditions of uncertainty, the 
        agencies have adopted an appropriate policy of moving forward 
        with well-justified measures while continually revising and 
        improving their regulatory requirements in the face of new 
        information.
The Benefits of Section 2715 and the SCB Rule Outweigh the Costs
    In their final rule implementing the requirements of section 2715, 
the agencies find that benefits are likely to outweigh costs. Annual 
compliance costs are estimated at $73 million. Given the massive size 
of the private health insurance market in the United States, even a 
small improvement in consumer decisionmaking would overwhelm this 
relatively modest cost.\1\
---------------------------------------------------------------------------
    \1\ For general background on the role of cost-benefit analysis in 
administrative decisionmaking, see Richard L. Revesz & Michael A. 
Livermore, Retaking Rationality: How Cost-Benefit Analysis Can Better 
Protect the Environment and Our Health (2008). This testimony is based 
on comments submitted by the Institute for Policy Integrity to the 
Department of Health and Human Services on July 6, 2011, http://
policyintegrity.org/documents/IPI_Letter_to_
HHS_7.6_.11_.pdf.
---------------------------------------------------------------------------
    The agencies cite several ways in which the rule will benefit 
consumers. First, improved access to information will allow consumers 
to ``make better coverage decisions, which more closely match their 
preferences with respect to benefit design, level of financial 
protection, and cost.'' \2\ Improved consumption decisions will result 
in increased consumer satisfaction.
---------------------------------------------------------------------------
    \2\ 77 Fed. Reg. 8682.
---------------------------------------------------------------------------
    The factual premise underlying this conclusion is that, without the 
rulemaking, consumers would not have access to, and process, an optimal 
amount of information when making health insurance decisions. There are 
good reasons to believe that this is correct. Choosing a health 
insurance plan is a complex decision, involving a wide range of 
probabilistic judgments on the part of consumers. This decision is made 
infrequently, and any feedback that consumers receive is attenuated by 
time and intervening circumstances. Firms will not have the incentive 
to present consumers with the socially optimal amount of information, 
in the form most easily processed, if consumers cannot readily predict 
their satisfaction levels based on product choices. Health insurance 
is, therefore, a context that is very well suited to a government 
disclosure requirement meant to improve consumer decisionmaking.\3\
---------------------------------------------------------------------------
    \3\ For an overview of recent scholarship concerning how government 
provision of information and improved ``choice architecture'' can 
facilitate better consumer decisionmaking, see Richard H. Thaler & Cass 
R. Sunstein, Nudge: Improving Decisions about Health, Wealth, and 
Happiness (2008).
---------------------------------------------------------------------------
    Second, the rule is expected to ``benefit consumers by reducing the 
time they spend searching for and compiling health plan and coverage 
information.'' \4\ Search time reduction can be a substantial savings 
and can be as valuable as pecuniary savings or improved health. 
Collecting information about health insurance plans is not a leisure 
activity; it is a form of work that carries disutility: hourly wages 
serve as a reasonable proxy for the rate at which individuals are 
willing to trade leisure for monetary compensation. The agencies cite 
research by the National Bureau of Economic Research that shows that 
making health insurance decisions, in particular, involves substantial 
search costs.\5\ This type of information gathering activity is also 
redundant with similar efforts undertaken across the economy by other 
individuals: if a trustworthy agent can act on behalf of the American 
public to compile relevant information in an easily accessible format, 
it represents a real economic savings.
---------------------------------------------------------------------------
    \4\ 77 Fed. Reg. 8682.
    \5\ 77 Fed. Reg. 8681.
---------------------------------------------------------------------------
    Third, the rule is anticipated to ``result[] in cost-savings for 
some value-conscious consumers who today pay higher premiums because of 
imperfect information about benefits.'' \6\ This consumer benefit could 
be interpreted as a transfer from insurance companies to their 
consumers, rather than a pure efficiency gain. However, the existence 
of these types of rents creates incentives for firms to compete, in an 
economically unproductive way, to capture them, at the very least 
through advertising. Equally problematic, from an efficiency 
perspective, would be attempts by insurance companies to increase these 
rents through product design, which not only involves the inefficient 
(from a social perspective) allocation of firm resources, but results 
in a marketplace with distorted consumer choices.
---------------------------------------------------------------------------
    \6\ 77 Fed. Reg. 8682-83.
---------------------------------------------------------------------------
    Finally, by ``making it easier for consumers to understand the key 
features of their coverage,'' the rule is anticipated to ``enhance 
consumers' ability to use their coverage.'' \7\ If consumers are better 
able to access health care services when they need them, it can lead to 
substantial health benefits, which has obvious economic value. 
Increased utilization of preventative health care services, in 
particular, can lead to social value if long-term chronic or 
catastrophic health outcomes can be avoided through early medical 
intervention.\8\
---------------------------------------------------------------------------
    \7\ 77 Fed. Reg. 8683.
    \8\ Of course, some preventative care interventions are more 
justified on cost-effectiveness grounds than others. See generally, 
Joshua T. Cohen, Does Preventive Care Save Money? Health Economics and 
the Presidential Candidates, 358 N. Engl. J. Med. 881 (2008).
---------------------------------------------------------------------------
    An additional, longer-term benefit of the rule, which is alluded to 
in the final rulemaking document, is that ``health insurance issuers 
and employers may face less pressure to compete on price, benefits, and 
quality'' if consumers lack appropriate information.\9\ The consequence 
is a marketplace with a distorted set of product choices. By helping 
improve consumer decisionmaking, the rule can facilitate a virtuous 
circle in which consumer satisfaction is increased not only through 
better choice between existing products, but also through the creation, 
and offer for sale, of insurance products that better conform to 
consumer preferences.
---------------------------------------------------------------------------
    \9\ 77 Fed. Reg. 8681.
---------------------------------------------------------------------------
    While the agencies provide a qualitative discussion of the benefits 
of the rulemaking, there is no quantitative estimate of regulatory 
benefits. Since President Reagan issued Executive Order 12291 in 1981, 
there has been a stated policy within the Executive of quantifying and 
monetizing regulatory costs and benefits, and the agencies recognize 
that the current Executive Order governing regulatory review 
``emphasizes the importance of quantifying both costs and benefits.'' 
\10\ The types of benefits anticipated by the rule, including increased 
consumer satisfaction, improved health outcomes, and time savings are 
all, in principle, amenable to quantification and monetization.
---------------------------------------------------------------------------
    \10\ 77 Fed. Reg. 8680.
---------------------------------------------------------------------------
    Although ongoing analysis of the effects of the rulemaking, 
including quantification and monetization of regulatory costs and 
benefits, is appropriate (as discussed below), the agencies followed a 
prudent path by moving forward with this regulatory action and avoiding 
unnecessary delay in the service of additional ex-ante analysis. 
Executive Order 12866 (still operative) encourages agencies to utilize 
``alternatives to direct regulation, including . . . providing 
information upon which choices can be made by the public,'' \11\ and 
Executive Order 13563 encourages agencies to ``consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public . . . includ[ing] disclosure requirements as well 
as provision of information to the public in a form that is clear and 
intelligible.'' \12\ The difficulty of predicting the effects of 
disclosure requirements ex-ante, however, sometimes interferes with the 
ability to quantify and monetize benefits in advance. Nevertheless, the 
benefits of disclosure requirements will often exceed their costs, 
because they are among the least restrictive forms of regulation. 
Furthermore, the costs of alternative disclosure requirements are 
likely to be similar: the important question is often not whether some 
form of disclosure is economically justified, but how to design the 
disclosure to maximize its net benefits. In these cases, the inquiry 
associated with cost-benefit analysis collapses into a technical 
exercise of how best to design the disclosure to improve consumer 
decisionmaking.
---------------------------------------------------------------------------
    \11\ 58 Fed. Reg. 51736.
    \12\ 76 Fed. Reg. 3822.
---------------------------------------------------------------------------
The Rule Is Based on the Available Evidence Concerning Consumer 
        Decisionmaking
    Extensive research in the fields of behavioral economics, 
psychology, and cognition show that it is not enough to simply 
``provide information.'' \13\ Consumers are known to have cognitive 
biases that affect their decisionmaking. Academic research on how 
individuals absorb and process information can inform the design of 
government policy to deliver the best possible results for the American 
Public.\14\
---------------------------------------------------------------------------
    \13\ Christine Jolls et al., A Behavioral Approach to Law and 
Economics, in Cass R. Sunstein, Behavioral Law and Economics 13, 42 
(Cass R. Sunstein ed., 2000).
    \14\ See e.g., Judith H. Hibbard, et al., Informing Consumer 
Decisions in Health Care: Implications from Decision-Making Research, 
75 Milbank Q. 395 (1997).
---------------------------------------------------------------------------
    Professor Cass Sunstein, until recently the administrator of the 
Office of Information and Regulatory Affairs, has argued that even 
seemingly small alterations in presentation format can ``highlight 
different aspects of options and suggest alternative heuristics'' that 
have demonstrable effects on people's behavior.\15\ Interventions 
taking advantage of these effects can be strikingly cost-benefit 
justified, since these psychological cues typically cost very 
little.\16\
---------------------------------------------------------------------------
    \15\ Cass R. Sunstein, Introduction, Behavioral Law and Economics 
1, 1.
    \16\ Hunt Allocott, Beliefs and Consumer Choice (MIT Working Paper, 
Nov. 2010), available at http://web.mit.edu/allcott/www/papers.html.
---------------------------------------------------------------------------
    OIRA has issued guidance on the use of disclosure to achieve 
regulatory ends.\17\ According to this guidance document, summary 
disclosure should be concise and straightforward to ``highlight the 
most relevant information'' and to ``increase the likelihood that 
people will see it, understand it, and act in accordance with what they 
have learned.'' \18\ Disclosure should avoid technical language or 
extraneous information that may be inaccessible to the average reader. 
OIRA has cautioned that ``[u]nduly complex and detailed disclosure 
requirements may fail to inform consumers'' because the disclosure 
``may not be read at all, and if it is read, it may not have an effect 
on behavior'' because it is poorly understood.\19\
---------------------------------------------------------------------------
    \17\ Memorandum from Cass R. Sunstein, Administrator, Office of 
Information and Regulatory Affairs to Heads of Exec. Dep'ts and 
Agencies 4 (June 18, 2010).
    \18\ Id. at 3.
    \19\ Office of Information and Regulatory Affairs, 2010 Report to 
Congress on the Benefits and Costs of Federal Regulations and Unfunded 
Mandates on State, Local, and Tribal Entities, Appendix D: Disclosure 
and Simplification as Regulatory Tools 55 (2010).
---------------------------------------------------------------------------
    Presenting information in this manner coincides with the statutory 
mandate to account for linguistic and educational barriers to health 
and literacy.\20\ There are large variations in the ``degree to which 
individuals have the capacity to obtain, process and understand basic 
health information.'' \21\ The Center for Health Care Strategies (CHCS) 
notes that ``[w]hile low health literacy is found across all 
demographic groups, it disproportionately affects non-white racial and 
ethnic groups; the elderly; individuals with lower socioeconomic status 
and education; people with physical and mental disabilities; those with 
low English proficiency (LEP); and non-native speakers of English.'' 
\22\ Indeed, low health literacy has been estimated to cost the U.S. 
economy between $106 billion and $236 billion annually. \23\ Presenting 
information in a format that is easy to understand and to act on will 
allow a wide range of consumers to make more informed insurance 
choices. If the SBC Rule prevents even a small portion of the costs of 
low health literacy, it will be extremely well justified in economic 
terms.
---------------------------------------------------------------------------
    \20\ Sec. 2715(b)(2).
    \21\ Stephen A. Somers & Roopa Mahadevan, Health Literacy 
Implications of the Affordable Care Act 4, Center for Health Care 
Strategies, Inc., November 2010 (report commissioned by the National 
Institute of Medicine).
    \22\ Center for Health Care Strategies, Inc., Health Literacy 
Implications of the Affordable Care Act 1, Missouri Foundation for 
Health's Health Summit, Dec. 9, 2010, available at www.mffh.org/mm/
files/Summit_Mahadevan_handout.pdf.
    \23\ Id.
---------------------------------------------------------------------------
    The SBC Rule was developed after a consultation process facilitated 
by a working group convened by the National Association of Insurance 
Commissioners that was composed of ``a diverse group of stakeholders'' 
and that ``considered the results of various consumer testing sponsored 
by both insurance industry and consumer associations.'' \24\ The rule 
references two focus group exercises, one conducted by America's Health 
Insurance Plans (a trade association) and the other conducted by 
Consumers Union.\25\ This testing supports the agencies' conclusion 
that the format of the disclosure information helped consumers make 
informed choices about their options.
---------------------------------------------------------------------------
    \24\ 77 Fed. Reg. 8670.
    \25\ 77 Fed. Reg. 8674.
---------------------------------------------------------------------------
    In addition to the standardized, simplified language used to 
disclose plan features, two benefits scenarios are included to 
illustrate plan differences. The common scenarios partially utilize the 
availability heuristic--people's tendency to assess risk depending on 
how readily examples come to mind. The availability heuristic can, in 
this context, help counter detrimental overconfidence. Consumers tend 
to be overoptimistic regarding risks to life and health, which can lead 
them to select under-inclusive insurance coverage. \26\ If people can 
easily think of relevant examples, they are far more likely to be 
concerned about those risks than if they cannot. Presenting common 
scenarios can encourage a realistic weighing of these scenarios in 
insurance purchasing.
---------------------------------------------------------------------------
    \26\ See generally David A. Armor and Shelley E. Taylor, When 
Predictions Fail: The Dilemma of Unrealistic Optimism, in Heuristics 
and Biases: The Psychology of Intuitive Judgment (Dale Griffin and 
Daniel Kahneman eds., 2002).
---------------------------------------------------------------------------
The Agencies Plan to Continue Testing and Improving its Disclosure 
        Format
    To maximize the benefits of the regulatory system, it is important 
to continually monitor and update regulatory programs in light of new 
information.\27\ OIRA has found that this may be particularly important 
``[w]ith respect to summary disclosure [because] agencies will often be 
able to learn more over time.'' \28\
---------------------------------------------------------------------------
    \27\ Michael Greenstone, Toward a Culture of Persistent Regulatory 
Experimentation and Evaluation, in New Perspectives on Regulation 111, 
113 (David Moss and John Cisternino eds., 2009).
    \28\ OIRA 2010 Report, supra note 19 at 101.
---------------------------------------------------------------------------
    Section 2715 requires a continual process ``review[ing] and 
update[ing]'' \29\ the effects of the SBC Rule. The agencies have 
committed to measuring the effect of disclosure on behavior through 
ongoing empirical analysis and to modifying the standards accordingly. 
In particular, the agencies are ``taking a phased approach to 
implementing the coverage examples and intend to consider additional 
feedback from consumer testing in the future.'' \30\ Revisions should 
be made ``to the extent. . .the evidence warrants,'' \31\ and it should 
be recognized that empirical findings may support retention of the 
agencies' initial design choice.
---------------------------------------------------------------------------
    \29\ Sec. 2715(c).
    \30\ 77 Fed. Reg. 8674.
    \31\ Id.
---------------------------------------------------------------------------
    Best practices require testing of potential disclosure formats,\32\ 
and as OIRA guidance documents make clear, testing should be a major 
component of any label evaluation process.\33\ The agencies now have 
the opportunity to test the SBC design in market conditions. Questions 
that should be asked include ``whether users are aware of the 
disclosure, whether they understand the disclosure, whether they 
remember the relevant information when they need it, whether they have 
changed their behavior because of the disclosure, and, if so, how.'' 
\34\
---------------------------------------------------------------------------
    \32\ See Sunstein, supra note 17 at 6.
    \33\ OIRA 2010 Report, supra note 19 at 56.
    \34\ Sunstein, supra note 17 at 5.
---------------------------------------------------------------------------
Conclusion
    The SBC Rule is an important move towards increased transparency in 
the health insurance market, with the ultimate aim of improving 
consumer welfare via informed consumer decisionmaking. Given the 
relatively low costs of implementing the rule (compared to the size of 
the market and potential benefits), a primary focus should continue to 
be testing and improving the design of summary disclosure and labeling 
to maximize the benefits of disclosing information. Consumers must be 
able to select insurance policies that better match their preferences 
and unique health needs if consumer satisfaction and improved health 
outcomes are to be realized. The current rule is likely to yield 
substantial net benefits, and the costs of delay associated with 
further pre-implementation analysis is not justified: the agencies have 
appropriately chosen to move forward with a rulemaking now, while 
committing themselves to further ex-post study. The SBC template is 
grounded in sound behavioral, economic, and psychological 
understandings of how consumers make choices, and further research, and 
refinement, will continue to increase the utility of this important 
consumer protection measure.

    The Chairman. That's it?
    Mr. Livermore. Yup.
    The Chairman. OK.
    Mr. Livermore. Thank you.
    The Chairman. All right.
    Peggy O'Kane, President, National Committee for Quality 
Assurance.

           STATEMENT OF MARGARET O'KANE, PRESIDENT, 
            NATIONAL COMMITTEE FOR QUALITY ASSURANCE

    Ms. O'Kane. Thank you, Mr. Chairman, and thank you, Ranking 
Member Thune. And I'm very pleased to be here today for this 
important hearing on increasing transparency in healthcare.
    My name is Margaret O'Kane, and I'm President of the 
National Committee for Quality Assurance. We're an independent 
nonprofit organization founded in 1990, to improve quality and 
value in healthcare through measurement, transparency, and 
accountability; so it's right there in our founding reason for 
being. We accredit health plans, and we measure the quality of 
both the care that they preside over and the members' 
experience.
    Our nation is making great strides in using transparency to 
improve quality and value in healthcare. And, of course, value 
means quality--the amount of quality or health that you get for 
your healthcare dollar. This includes public reporting of 
standardized performance measures, performance-based 
accreditation, and Affordable Care Act innovations, like the 
standardized Summary of Benefits and Coverage, which the other 
two have already spoken about so eloquently.
    The ACA provision linking Medicare Advantage bonus payments 
to performance has been especially effective, and recent 
research shows, beneficiaries are now more likely to pick high-
value plans. In fact, we've seen Medicare Advantage plans' 
quality results increasing significantly since the ACA linked 
bonus payments to performance scores.
    The ACA will further harness transparency to promote 
quality and value through State health insurance exchanges. 
Exchanges represent a unique opportunity to engage consumers in 
using transparent quality and cost data together to find the 
best value. And, of course, many consumers haven't had a choice 
of plans for a long time, so this is actually a real 
marketplace that the exchange will create.
    Value means more than just low premiums, which may reflect 
low quality or high cost-sharing barriers to care. Value is the 
quality of the health and well-being you get for the total cost 
you pay, which includes premiums, copays, and deductibles.
    Helping consumers find the best value requires designing 
exchanges in ways that make our cost and quality information 
easy to use. If done effectively, this will also cause plans to 
compete, based on value, not just cost, and further drive 
consumer engagement and market performance.
    The complexity of cost and quality information can quickly 
overwhelm consumers. So, how exchanges present the data matters 
a great deal. Groups like Consumer Reports and behavioral 
economists, like Mr. Livermore's center, are uniquely skilled 
in developing ways to communicate complex information 
effectively to consumers. Applying lessons from the science of 
behavioral economics and choice architecture can also help 
consumers to get the best value plans.
    In addition, the Federal Government is developing a quality 
rating system for exchanges, and we have high hopes that it 
will help consumers make more informed purchasing decisions. Up 
until now, large employers, the Federal Government, and many 
State Medicaid programs have been important users of quality 
information, and have pushed for and rewarded quality results. 
However, public reporting to consumers has had minimal impact. 
Exchanges have enormous potential to change that. We are 
particularly encouraged by our research that shows consumers, 
especially the uninsured who will be shopping for exchange 
coverage, want cost and quality information when they're 
choosing plans.
    Given the many challenges in establishing exchanges, few 
states are yet actively working to use transparency to engage 
patients on cost and quality, and HHS has yet to issue rules on 
ACA activities to improve quality. Once exchanges are 
functioning, however, Congress should closely monitor Federal 
and State efforts, and require HHS to report on them, to ensure 
that this important opportunity to drive a value agenda is not 
lost.
    Despite the progress we are making, there are still 
important gaps in transparency. For example, we're not able to 
compare quality in fee-for-service Medicare with Medicare 
Advantage plans, as MEDPAC has recommended. We need 
transparency on the prices of healthcare services that drives 
costs.
    I brought my Time magazine. I don't know how many----
    The Chairman. Yes.
    Ms. O'Kane.--of you have seen. This guy's been on every TV 
show that I watch.
    The Chairman. It's must-reading, isn't it?
    Ms. O'Kane. It really is. And I think it's very salient to 
consumers. Consumers are really shocked when they read this. 
So, I think it's kind of a golden opportunity to educate people 
more about what healthcare costs, and help them become part of 
driving the solution.
    We need to make transparency and consumer choice part of a 
broader value strategy that includes payment and delivery 
system reforms. We also must do more to understand how 
transparency can better engage consumers in taking a more 
active role in their own health.
    But, at least we're heading in the right direction. And I 
think transparency, to me, is foundational to everything we do 
in public policy.
    So, thank you so much for the opportunity to be here today.
    [The prepared statement of Ms. O'Kane follows:]

           Prepared Statement of Margaret O'Kane, President, 
                National Committee for Quality Assurance
    Chairman Rockefeller, Ranking Member Thune, distinguished committee 
members, thank you for inviting me to this important hearing on 
increasing transparency in health care. I am Margaret O'Kane, President 
of the National Committee for Quality Assurance. NCQA is an 
independent, nonprofit organization founded in 1990 to improve quality 
and value in health care through measurement, transparency and 
accountability.
    Our nation is making great strides in using transparency to improve 
quality and value in health care through public reporting of 
standardized performance measures, performance-based accreditation and 
Affordable Care Act (ACA) innovations like the standardized Summary of 
Benefits and Coverage. The ACA provision linking Medicare Advantage 
bonus payments to performance has been especially effective and recent 
research shows beneficiaries are more likely to pick high-performing 
plans. In fact, we have seen Medicare Advantage plans' quality results 
increasing significantly since the ACA linked bonus payments to 
performance scores.
    The ACA will further harness transparency to promote quality and 
value through state health insurance Exchanges. Exchanges represent a 
unique opportunity to engage consumers in using transparent quality and 
cost data together to find the best value. Value means more than low 
premiums, which may reflect low quality or high cost-sharing barriers 
to care. Value is the quality of the health and well-being you get for 
the total cost you pay, which includes premiums, copays and 
deductibles.
    Helping consumers find the best value requires designing Exchanges 
in ways that promote competition among plans based on value, rather 
than premiums alone. The ACA requires a `quality rating system' for 
Exchange plans that once deployed should be a strong step towards 
helping consumers find high-value plans. In addition, building 
Exchanges to promote value requires Web portals and other outreach 
materials that make cost and quality information easy to find and use. 
The complexity of the information can quickly overwhelm consumers, so 
how Exchanges present data matters a great deal. Groups like Consumer 
Reports are uniquely skilled in developing approaches to communicate 
this information effectively to consumers. Applying lessons from the 
science of behavioral economics and ``choice architecture'' can also 
help guide consumers to plans offering the best value.
    Up until now, large employers, the Federal government and many 
state Medicaid programs have been important users of quality 
information and have pushed for quality results. However, public 
reporting of cost and quality information to consumers has, thus far, 
had minimal impact. Exchanges have enormous potential to change that. 
We are particularly encouraged by our research finding that consumers--
especially the uninsured, who will be shopping for Exchange coverage--
want cost and quality information when choosing plans and providers.
    Given the many challenges in establishing Exchanges, few states are 
currently working on all the potential strategies to use transparency 
to engage consumers on cost and quality. Once the Exchanges get past 
the immediate job of getting enrollment systems into place, however, 
Congress should encourage both Federal and state Exchanges to support 
innovation and consumer engagement using the many potential strategies 
available. Congress should also consider having HHS report on Exchange 
progress on transparency.
    Despite the progress we are making, there are still important gaps 
in transparency. For example, we are not able to effectively compare 
quality in Medicare fee-for-service with Medicare Advantage plans, 
something MedPAC has recommended to change.\1\ We need much greater 
transparency on the prices of health care services that drive costs. We 
must make transparency and consumer choice part of a broader value 
strategy that includes payment and delivery system reforms. We also 
must do more to understand how to use transparency to better engage 
consumers in taking a more active role in their own health and health 
care.
---------------------------------------------------------------------------
    \1\ MedPAC Report to Congress, March 2010: http://medpac.gov/
documents/Mar10_Entire
Report.pdf.
---------------------------------------------------------------------------
    Public Reporting of Standardized Measurement: There is now 
widespread use of standardized, audited performance measures like the 
Healthcare Effectiveness Data and Information Set (HEDIS)\2\ and the 
Consumer Assessment of Healthcare Providers and Systems Survey 
(CAHPS).\3\ For 20 years, we have publicly reported results from 
HEDIS, the most widely used and respected performance measurement set 
in health care. HEDIS includes more than 70 measures of proven, 
effective care--and of waste that increases costs and harms patients. 
CAHPS measures patient experience, such as whether patients get care 
when they need it; whether physicians listen to patients and explain 
things in a way they can understand; and whether customer service is 
helpful and respectful.
---------------------------------------------------------------------------
    \2\ HEDIS is a registered trademark of NCQA.
    \3\ CAHPS is a registered trademark of the Agency for Healthcare 
Research and Quality (AHRQ), which oversees the survey.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    More than 125 million enrollees (2 of every 5 Americans) are 
enrolled in a health plan that submits audited clinical quality and 
patient customer experience data to NCQA. NCQA translates that data 
into health plan ``report cards'' that everyone can see for free on the 
www.ncqa.org website. We also use the data to publish plan rankings in 
Consumer Reports magazine and to develop our annual State of Health 
Care Quality Report.\4\ Measuring and publicly reporting results are 
essential for driving, and holding plans accountable for, needed 
improvement in quality and cost. The result is dramatic improvement 
over time in areas like optimal care for diabetes and hypertension--
saving both lives and money.
---------------------------------------------------------------------------
    \4\ http://www.ncqa.org/Portals/0/State%20of%20Health%20Care/2012/
SOHC%20Report%20
Web.pdf

     Estimated Savings if All Plans Performed as Well as the Top 10%
------------------------------------------------------------------------
              MEASURE                      AVOIDABLE HOSPITAL COSTS
------------------------------------------------------------------------
Breast Cancer Screening              $329 million-$332 million
------------------------------------------------------------------------
Cholesterol Management               $935 million-$2.1 billion
------------------------------------------------------------------------
Controlling High Blood Pressure      $1.4 million-$2.5 billion
------------------------------------------------------------------------
Diabetes Care--HbA1c Control         $294 million-$614 million
------------------------------------------------------------------------
Osteoporosis Management              $12.4 million-$32 million
------------------------------------------------------------------------
Persistent Beta-Blocker Treatment    $5.5 million-$30 million
------------------------------------------------------------------------
Smoking Cessation                    $831 million-$900 million
------------------------------------------------------------------------
TOTAL                                $2.4 billion-$6.5 billion
------------------------------------------------------------------------

    Performance-Based Accreditation: HEDIS and CAHPS are essential 
components of NCQA's performance-based Health Plan Accreditation 
program that measures and publicly reports on the quality of care and 
patient experience that plans deliver. More than 136 million Americans 
are in NCQA-Accredited plans, a 30 percent increase since 2009. Most 
state Medicaid programs also require or recognize NCQA Accreditation, 
as does the Medicare Advantage program and the Federal Employees Health 
Benefit Program. The ACA specifically requires all Exchange plans to 
have accreditation, based on the NCQA model.
Transparency & the Affordable Care Act
    The ACA includes several important transparency advances that will 
promote quality and value. The standardized Summary of Benefits and 
Coverage is already making it easier for consumers to compare plan 
benefits and costs to identify affordable coverage, a critical first 
step toward quality care. The ACA further promotes transparency through 
Medicare Advantage performance-based bonuses, state Exchange 
accreditation and public reporting requirements.
    Medicare Advantage Star Ratings: The ACA requires using 
transparency to drive Medicare Advantage improvements through bonuses 
to plans based on a publicly reported 5-Star Rating system of clinical 
quality and patient experience. Most states also now use pay-for-
performance systems to drive improvements in Medicaid. In just the two 
first years of the Medicare Advantage bonus system, more than 25 
percent of plans have improved their HEDIS scores and the number of 
highest-rated 5-Star plans has increased from 3 to 11. Medicare posts 
Star Ratings on the www.medicare.gov plan finder to help beneficiaries 
make informed enrollment decisions. The plan finder also flags 
consistently poor performing plans and discourages beneficiaries from 
enrolling in them.
    Recent research shows that Medicare beneficiaries are more likely 
to pick plans with higher star ratings. The study found that a one star 
increase was linked to a 9.5 percent greater likelihood of enrollment 
for new beneficiaries and a 4.5 percent greater likelihood for those 
switching plans.\5\ In short, public reporting is helping consumers 
find high value plans, which should lead to better care for 
beneficiaries and will further encourage those plans to improve quality 
and lower costs.
---------------------------------------------------------------------------
    \5\ Howell, Reid, Shrank, Association Between Medicare Advantage 
Plan Star Ratings and Enrollment, Journal of the American Medical 
Association, January 2013 http://jama.jamanet
work.com/article.aspx?articleid=1557733
---------------------------------------------------------------------------
    We believe Star Ratings could have more impact if the plan finder 
listed highest quality plans first instead of listing plans with the 
lowest estimated beneficiary costs first, as it does now. Research 
shows ``what consumers see first will frame their understanding of the 
rest of information--in effect, creating a mental model for them . . . 
(that) influences the consumer's final decision.'' \6\
---------------------------------------------------------------------------
    \6\ Choice Architecture: Design Decisions that Affect Consumers' 
Health Plan Choices, Kleimann Communication Group and Consumers Union, 
July 2012, http://www.con
sumersunion.org/pdf/Choice_Architecture_Report.pdf
---------------------------------------------------------------------------
    Building State Health Insurance Exchanges to Promote Value: One of 
the ACA's most important transparency advances begins this fall, when 
health insurance Exchanges open for enrollment. Exchanges have great 
potential to realign market forces if designed to promote competition 
among plans based on value.\7\ This marks substantial change from the 
current insurance market, which encourages competition based on low 
premiums alone that may reflect poor quality or high cost-sharing 
barriers to care.
---------------------------------------------------------------------------
    \7\ Building State Exchanges To Get Better Value, National 
Committee for Quality Assurance, 2012, http://www.ncqa.org/
PublicPolicy/Exchanges.aspx
---------------------------------------------------------------------------
    Importantly, the law also requires the Secretary to develop a 
`Quality Rating System' for Exchange plans. NCQA is supporting CMS in 
the work on this new rating system--under the leadership of Booz Allen 
Hamilton and in collaboration with Pacific Business Group on Health. We 
have high hopes that it will be a critical tool for Exchanges to help 
consumers make more informed purchasing decisions.
    Health plans have many tools they can use to promote quality.

   They can use ``value-based insurance design,'' or ``smart 
        cost-sharing'' that reduces barriers to prevention and good 
        management of chronic conditions, averting costly 
        complications.

   They can develop networks and encourage enrollees to use 
        high-quality providers.

   They can remind enrollees and providers about important 
        needs like routine screening and prescription refills.

   They can promote shared decision making to encourage 
        patients and providers to make informed treatment choices 
        together, based on objective, current science on the pros and 
        cons of various options.

   They can promote quality by supporting and encouraging 
        enrollees to get care in recognized PCMHs and ACOs, delivery 
        system reforms focused on improving cost and quality.

    Today, cost and quality vary widely among health plans because 
people rarely help understanding plan value. The problem is compounded 
because people often believe that more services automatically mean 
better care (rather than waste and the potential for harm), or that 
more expensive care is always more effective. This is not true. High 
quality care is not always the most expensive care for a number of 
reasons. Expenses may be driven up by unnecessary utilization or by 
high prices.
    Because higher costs do not necessarily lead to higher quality, it 
is critical to educate consumers on the concept of value and to 
encourage them to consider both cost and quality data when selecting 
plans and providers. Informed consumers can help elevate the importance 
of value in health care by shopping for and choosing plans and 
providers with the highest quality and lowest costs.
    Consumers Want Transparent Cost & Quality Information: NCQA 
research with the California Healthcare Foundation found that with 
help, consumers quickly understand that quality does not necessarily 
cost more--and that it can cost less.\8\ Consumers generally need help 
to understand this, as it is not intuitive for most people. However, 
once consumers do understand it, they are greatly interested in using 
cost and quality information together to help them select a health plan 
or physician organization. We also found that the people most 
interested in this information are the uninsured who will be accessing 
health care coverage through the Exchanges.
---------------------------------------------------------------------------
    \8\ Value Judgment: Helping Health care Consumers Use Quality and 
Cost Information, http://www.ncqa.org/Portals/0/Public%20Policy/
CHCF%20ValueJudgmentQualityCostInformation
.pdf
---------------------------------------------------------------------------
    Exchanges can advance transparency on cost and quality by:

   Helping Exchange shoppers understand value.

   Helping Exchange shoppers find high-value plans.

    There are additional important principles Exchanges should follow 
to help consumers make the most of transparent cost and quality 
information. Exchanges need to:

   Present information to consumers as simply as possible. 
        Studies and experience shows that too much information can bog 
        down the enrollment process or prevent someone from choosing a 
        plan.

   Build from existing measures and data collection systems to 
        ensure straightforward and efficient implementation. This will 
        help align efforts to improve quality and provide information 
        on performance to consumers and regulators, limiting the burden 
        on states, plans and the federal government.

   Limit data collection to data that has a clear use; there is 
        considerable cost for reporting unused data.

   Add more information, new measures and quality improvement 
        and assurance strategies over time. Give stakeholders the 
        opportunity to comment on direction, and give plans and states 
        the opportunity to implement system changes.

    Helping Exchange Shoppers Understand Value: One of the most 
important things Exchanges can do to promote value is help shoppers 
understand the need to look beyond premiums to total out-of-pocket 
costs and quality ratings. Many Exchange shoppers do not currently have 
insurance and may have low health literacy and scant knowledge about 
total coverage costs or how to evaluate plan quality. Exchanges that 
address this information gap will help people find plans that produce 
better outcomes at lower costs.
    Exchange shoppers need to understand copays and deductibles in 
addition to premiums. In the Massachusetts health Exchange, for 
example, many enrollees chose plans based on low premiums alone, only 
to discover when seeking care that they must also pay deductibles and 
copays. Cost sharing may be significant in the lower-premium Silver and 
Bronze plans that will attract many modest-income Exchange shoppers, 
but high cost sharing discourages people, especially those with modest 
incomes, from getting care.\9\ \10\ When cost sharing discourages use 
of necessary, cost-effective care, the result can be expensive, 
preventable problems. The failure to treat preventable problems up 
front will continue to drive up health care costs and make coverage 
difficult to afford.
---------------------------------------------------------------------------
    \9\ Healthcare Spending and Preventive Care in High-Deductible and 
Consumer-Directed Health Plans, Buntin et al, American Journal of 
Managed Care, March 2011.
    \10\ Nearly Half of Families In High-Deductible Health Plans Whose 
Members Have Chronic Conditions Face Substantial Financial Burden, 
Galbraith et al, Health Affairs, May 2011.
---------------------------------------------------------------------------
    Shoppers also are not likely to know that Exchange plans must 
report on measures of clinical quality (like the HEDIS measures) and on 
``experience of care'' measures (like the CAHPS measures). Exchanges 
that help consumers understand how to use total cost and quality data 
will see more of them choosing high-value plans, and encourage insurers 
to compete on improving both cost and quality scores. That will 
maximize consumer-driven market forces to promote better value.
    Helping Exchange Shoppers Find Value: Once Exchange shoppers 
understand the importance of total cost and quality, the next step is 
making it easy for shoppers to find and use this information when they 
choose a health plan. Exchanges can accomplish this by using Web 
portals and report cards that employ choice architecture.
    Most shoppers will not know how to assess complex cost and quality 
data, even if they understand the importance of total cost and quality. 
Nor will they want to spend a lot of time evaluating plan choices. By 
structuring choices properly using choice architecture, shoppers will 
not need to understand every detail and still end up in high-value 
plans.
    Report Cards and Web Portals: Exchanges Web portals and other tools 
will help shoppers evaluate plans. How Exchanges craft these tools can 
have an enormous impact on whether shoppers choose high-value plans.
    Exchanges should ``feature quality information as prominently as 
costs,'' says Informed Patient Institute Executive Director Carol 
Cronin. Cronin analyzed 70 health plan report cards for AARP and found 
that the most useful ones ``roll up'' quality measures into a single 
score that consumer can interpret ``at a glance.'' \11\ They also offer 
more details for consumers who want to dig deeper.
---------------------------------------------------------------------------
    \11\ http://www.aarp.org/content/dam/aarp/health/
medicare_insurance/2011-07/2011-cro
nin-report-final.pdf
---------------------------------------------------------------------------
    To ensure that Web portals and report cards promote value, 
Exchanges should:

   Present easy-to-understand plan ratings that combine quality 
        and cost rankings (e.g., through the to-be-developed Federal 
        Quality Rating System).

   Provide detailed (but easy to understand) plan ratings 
        (e.g., how well plans help enrollees ``Stay Healthy,'' ``Get 
        Better'' and ``Live With Illness'').

   Make it easy to see which plans are better at providing 
        high-quality care, like prevention and care management, so 
        consumers can avoid care they do not want, like preventable 
        hospital stays and surgeries. (This information is included in 
        HEDIS data.)

   Estimate total costs for care of common chronic conditions, 
        like diabetes, and high-cost situations, like childbirth, so 
        low premiums do not lure people into plans with high cost 
        sharing.

   Create tools to recommend high-value plans based on consumer 
        preference (e.g., doctors they want to keep, plans that manage 
        a specific chronic condition well).

   Recommend high-value plans or automatically enroll people in 
        high-value plans if they do not choose a plan on their own. 
        Default enrollment is a powerful financial incentive for plans 
        to improve their ratings.\12\
---------------------------------------------------------------------------
    \12\ For more information on ratings and decision support, see 
``Exchange Quality Solutions: Ratings and Decision Support Tools.'' 
http://www.ncqa.org/LinkClick.aspx?fileticket=RNqdq-GjOnU%3D&tabid=61

    Choice Architecture: Marketers have long used choice architecture 
to influence shoppers, which is why candy bars and other impulse-
purchase items are in checkout lanes. School cafeterias are now using 
choice architecture to promote healthier choices: making it easier to 
reach fruits and vegetables than French fries and desserts sells more 
fruits and vegetables, even though fries and desserts are still 
available. Exchanges that make high-value plans ``easier to reach'' 
will also see more shoppers choose high-value plans, even with other 
options available.
    Consumers Union's Lynn Quincy says Exchange planners should 
``abandon the image of a careful shopper capable of weighing the myriad 
costs and benefits of their health insurance options.'' Her research on 
how consumers make health plan choices shows they want value 
information, but need help finding it.\13\ Exchanges should provide 
shortcuts that make it easy to compare value and avoid jargon and 
complex math.
---------------------------------------------------------------------------
    \13\ Early Consumer Testing of the Coverage Facts Label: A New Way 
of Comparing Health Insurance http://www.consumersunion.org/health.html
---------------------------------------------------------------------------
    Understanding how people make choices is critical when designing 
Web portals and report cards to promote value. The standard economic 
assumption that rational self-interest guides choice is often not the 
case, says Harvard School of Public Health professor, Katherine 
Baicker. Consumers instead ``have fallible judgment, malleable 
preferences, make mistakes, and can be myopic or impatient.'' \14\
---------------------------------------------------------------------------
    \14\ http://www.hsph.harvard.edu/faculty/katherine-baicker/
---------------------------------------------------------------------------
    Choice architecture considers these realities in order to present 
information better, to ensure that information is meaningful and to 
make high-value options an easy choice. This is especially important 
for Exchanges that let all qualified plans participate. Baicker says 
presenting too many options can lead to ``choice paralysis'' that 
causes people to either give up or make choices based on bias or bad 
information.
    Conclusion: While we are making great strides in using transparency 
to improve quality and value in health care, we still have a long way 
to go. We must build on the substantial progress to date, including the 
recent advances with the standardized Summary of Benefits and Coverage 
and performance-based bonuses in Medicare Advantage. Transparency in 
delivery system reforms is crucial to their success; we must be 
vigilant in using transparency to its greatest potential. We must also 
work together to ensure that state health insurance Exchanges make the 
most of their potential for using market forces to promote better 
value.
    Transparency and consumer choice are tools that should be part of a 
multifaceted strategy that includes payment and delivery system reforms 
and greater emphasis on patient engagement in their own health and 
health care.
    Of course, success depends on thoughtful implementation, on 
tailoring to local preferences and on building strong stakeholder 
consensus for the best approach in each state and for each program. But 
the value of health care provided in the U.S. will not improve without 
employing the strategies discussed above.

    The Chairman. Thank you very much, Ms. O'Kane.
    And now, Neil Trautwein. We're very happy that you're here, 
sir.

  STATEMENT OF E. NEIL TRAUTWEIN, VICE PRESIDENT AND EMPLOYEE 
      BENEFITS POLICY COUNSEL, NATIONAL RETAIL FEDERATION

    Mr. Trautwein. Thank you, Chairman Rockefeller, Ranking 
Member Thune, members of the Committee. I appreciate the 
opportunity to appear before you today.
    I'm a Vice President with the National Retail Federation, 
and I'm pleased to appear on behalf of NRF, which is the voice 
of all channels of retail distribution.
    Retail supports one out of every four jobs in the American 
economy. We support effective implementation of the Affordable 
Care Act, despite our continued concerns on the law, itself. 
We've met, numerous times, with the administration on specific 
regulatory issues, and we have submitted written comments on 
key issues. We appreciate the administration's attention to 
retail concerns. Many retail employees don't fit neatly into 
full-time or part-time categories, and so, the--certainly, the 
flexibility issues are important.
    Our members are struggling to keep abreast of all the 
different requirements that are coming up to that 2014 
deadline. This is where we really find the hard intersection 
between the promise of transparency and the burden that 
employers are carrying, in terms of coming up to speed on 
compliance on the Affordable Care Act. I fear there's a danger 
of crowding out employer enthusiasm for movements toward 
greater focus on quality and cost consciousness in healthcare 
as a consequence of this. I hope not, because I think the 
initiatives that NCQA and others have taken in this area, which 
employers have long been involved in, are very important to 
driving lower cost, better quality healthcare.
    We think it's important that we strengthen these efforts 
even in the midst of implementation of the ACA. It's not going 
to be easy. We're seeking to retrain people to seek out the 
quality options in healthcare. Sometimes less care, or more 
effective care, is better than more care. And that's a tough 
lesson for a lot of people to learn. Unfortunately, people are 
very stubborn in our habits, and we don't change quickly or 
easily.
    Transparency and awareness of better interests, quality and 
cost, both, are likely the best impetus to changing consumer 
behavior. Still, it's not easy. We employers have conducted 
employee briefings, we've brought in outside experts, we've 
tried to explain the coverage, and we've really gone the extra 
mile. Many of us weren't sure, on first impression, whether the 
Summary of Benefit and Coverage provision made sense as an 
addition to that, and was not just duplicative of the existing 
Summary Plan Description. Still, the SBC, with coverage 
examples and the uniform glossary, can be helpful tools for 
employers and employees toward employee education.
    Flexibility in the distribution of the SBC is important. 
Availability is one issue, comprehension is another issue. How 
do we entice employees to read the information we provide, we 
deliver in the SBC, or make available in other contexts? So, 
transparency is clearly important, but it's not sufficient.
    Retailers and other employers are particularly concerned by 
one element of the SBC, and that is the penalties attached to 
the SBC for employers who willfully miss delivery of that 
document. It's very important to get it out to consumers as 
part of their owner's manual. It's very important to post it 
where they can get to that when they need it. But, the 
particular penalties are causing concern in the employer 
communities. We encourage you to rethink this element of the 
SBC.
    We've received a lot of guidance on the ACA--as Ranking 
Member Thune indicated, almost 18,000 pages of regulations 
through this. Two significant regulations just came out last 
week on the essential health benefits and the insurance market 
reform. Both will add cost of coverage, perhaps even 
significantly to coverage. That's a real problem, because 
people have to be able to afford the coverage we offer. We're 
working hard to help our members over this communication gap 
and to figure out how they manage to provide coverage.
    In sum, I ask you to continue to encourage greater 
transparency in healthcare. I think it's a positive element to 
help drive better-quality and lower-cost care. At the same 
time, I urge you to be wary and cognizant of the regulatory 
burden that employers are laboring over as we meet the 
transition in 2014. Retailers and other employers should be, 
and can be, powerful advocates for positive change, but the 
ACA's going to put some pressure on that ability and that 
willingness to move in that direction. We hope to work with you 
to help mitigate those effects, and hope to help improve the 
implementation of the ACA.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Trautwein follows:]

 Prepared Statement of E. Neil Trautwein, Vice President and Employee 
          Benefits Policy Counsel, National Retail Federation
    Chairman Rockefeller, Ranking Member Thune and honored members of 
the Committee, I thank you for the opportunity to appear before you 
today and to share our views regarding the Affordable Care Act (ACA), 
the need for greater transparency and the ACA's Summary of Benefits and 
Coverage (SBC), Coverage Examples and Uniform Glossary provisions. My 
name is Neil Trautwein and I am a vice president and Employee Benefits 
Policy Counsel with the National Retail Federation (NRF).
    As the world's largest retail trade association and the voice of 
retail worldwide, NRF represents retailers of all types and sizes, 
including chain restaurants and industry partners, from the United 
States and more than 45 countries abroad. Retailers operate more than 
3.6 million U.S. establishments that support one in four U.S. jobs--42 
million working Americans. Contributing $2.5 trillion to annual GDP, 
retail is a daily barometer for the Nation's economy. NRF's Retail 
Means Jobs campaign emphasizes the economic importance of retail and 
encourages policymakers to support a Jobs, Innovation and Consumer 
Value Agenda aimed at boosting economic growth and job creation. 
www.nrf.com
    NRF supports effective implementation of the Affordable Care Act, 
despite our continued concerns about the law itself. We remain greatly 
worried by the fast-approaching deadlines for key issues affecting 
coverage in every market, especially in light of the steady torrent of 
regulations from the Administration. Our nation cannot afford for the 
ACA to stumble out of the starting gate. We fear that as time 
diminishes between now and January 2014, a cascade of last minute 
regulations will create confusion and thus could encourage more 
employers to back out of coverage.
NRF and ACA Implementation
    NRF has been closely engaged in the regulatory process ever since 
the ACA was signed into law. We have met numerous times with regulators 
and have submitted written comments on key concerns. We have assisted 
in submitting joint coalition comments as well. We have not been 
litigants against the ACA and also did not submit amicus comments in 
the ACA case before the Supreme Court.
    We credit the regulatory agencies \1\ for working hard and fairly 
cooperatively to implement the ACA, a difficult task by any measure. 
The Administration has been properly solicitous of the greater retail 
industry, both because of our industry's important role in the economy 
as well as the nature of retail employment. Many retail and restaurant 
employees do not fit neatly into full and part-time categories and 
compliance with the unprecedented levels of change under the ACA will 
be particularly challenging.
---------------------------------------------------------------------------
    \1\ Departments of Health and Human Services, Labor and Treasury.
---------------------------------------------------------------------------
    This is where we find the hard intersection between the promise of 
transparency to help employers and consumers find better value in 
health care and coverage and employers straining to their new 
responsibilities under the ACA, some beginning as soon as June this 
year. There is the danger of crowding out employer enthusiasm for 
driving better quality and lower cost health care through initiatives 
from the Pacific Business Group on Health, along with my fellow 
panelist from NCQA and many others. NRF strongly supports these 
initiatives. It is important in our view to preserve and strengthen 
these employer-led reform efforts, even as implementation of the ACA 
continues.
Changing Behavior
    Change at any level is difficult. We are attempting to retrain 
people to seek the better quality health care options. Sometimes, less 
(but more effective) care is better than more care. I recall the 
frustration of a former member of mine in a different association 
(Francois de Brantes, then of GE, now of Bridges to Excellence) saying 
that he could place neon exit signs leading to better quality health 
care providers, but most employees would rather stick with their old, 
inferior quality and more expensive providers instead.
    We humans are stubborn in our habits, good or bad. Transparency and 
awareness of better interest--quality and cost both--is likely the best 
tool toward building better consumers of health care and coverage.
Summary of Benefits and Coverage
    Health benefits are the biggest component (next to wages) in 
employee compensation. Employers have struggled mightily to help 
employees understand and get the best value from their benefits. 
Distribution of Summary Plan Description (SPD) documents are just the 
beginning. Employers have conducted countless employee briefings (both 
by company staff and outside experts, such as agents and brokers) among 
other efforts to help educate eligible employees. Many employers have 
built web-based resources to help guide employees through benefits 
issues.
    The new Summary of Benefits and Coverage (SBC) requirement and 
Uniform Glossary are the latest manifestation of this employer 
objective: to help employees and dependents understand the content and 
extent of their coverage options. Employers were not entirely sure that 
the SBC was necessary and not just duplicative of the SPD. Still, the 
SBC with coverage examples and Uniform Glossary can be helpful tools 
for employers toward employee education.
    Flexibility in distribution of the SBC is helpful. The ability to 
post electronically and to e-mail SBC's (subject to notice and on-
demand availability of paper copies) is efficient. Nevertheless, 
availability is one issue and comprehension is entirely another. How do 
we entice or compel employees and dependents to read and understand 
their benefits?
    Some benefit designs seek to use financial interest--our wallets--
to help lead our brains to better health care decisions. Results are 
encouraging but inconclusive. Ultimately though, we may need to look to 
our children and grandchildren to take this closer to heart and better 
interest. That awareness just might be forged in a generational 
crucible built as a consequence of the graying of America. It will not 
be a pain free process, unfortunately.
    Retailers and other employers are particularly concerned by one 
element of unwarranted SBC compulsion: employer penalties for willful 
failure to distribute SBCs. These penalties are expensive--at $1,000 
per willful failure with daily penalties of $100--and when added to 
myriad other potential penalties and fees under the ACA, could tend to 
discourage employers from offering coverage. We recommend that this 
Committee and the Congress rethink this portion of the SBC requirement.
    In addition, we are concerned by the SBC requirement that SBC be 
made linguistically appropriate for populations where 10 percent or 
more are literate in a non-English language. This is an expansion of an 
old SPD requirement and in practice employers have adapted where 
necessary, for example to hold Spanish language briefings. Still, we 
fear that the new SBC requirements will add to carrier cost and thus to 
coverage cost, too.
Affordable Care Act and Employers
    Change is coming to employer-sponsored health plans at a torrential 
pace. In testimony \2\ last year to the House Ways and Means 
Subcommittee on Health, I warned that definitive regulatory guidance 
was needed at least by the first quarter of 2013. The regulatory pace 
has definitely picked up after November 2012.
---------------------------------------------------------------------------
    \2\ September 12, 2012
---------------------------------------------------------------------------
    We have received a lot of regulatory guidance--some 18,000 pages of 
regulations by some estimates--with two significant regulations on 
essential health benefits and health insurance market reform coming out 
just last week. Both the EHB and market reform provisions (especially 
the compression of age bands) very likely will add to coverage costs.
    NRF has worked hard to help our members understand what their 
options and future responsibilities will be. I provided both majority 
and minority staff with a copy of the slides from a recent NRF webinar 
presentation on ACA compliance. Another is planned for March and likely 
will continue throughout the year. I spend a lot of time speaking to 
diverse retail and other employer audiences as well. The learning curve 
among retailers and other employers is steep and still growing.
NRF, Allied Coalitions and the Affordable Care Act
    NRF has actively encouraged the fair and effective implementation 
of the ACA, despite our continued opposition to the law itself. We see 
no inconsistency between the two positions; we owe it to our members to 
help make the law as workable as possible so long as it remains the law 
of this land. We stand ready to assist any effort to improve upon 
implementation of the ACA.
    We are engaged in a number of allied coalition efforts on ACA 
implementation. For example, NRF chairs the Essential Health Benefits 
Coalition \3\ (EHBC) and participates in the leadership of the 
Coalition for Choice and Competition \4\ (CCC) and Employers for 
Flexibility in Health Care (EFHC). The number of coalitions addressing 
aspects of ACA implementation has grown so much as to require a degree 
of coordination between them. NRF established and chairs the Employers' 
Health Care Clearinghouse, which meets on a monthly basis to do just 
that.
---------------------------------------------------------------------------
    \3\ www.ehbcoalition.org
    \4\ www.choiceandcompetitioncoalition.org
---------------------------------------------------------------------------
    These coalitions are deeply substantive and deal with specific ACA 
implementation concerns. They also have served a useful role in 
developing and coordinating views and comments among allied employer 
interests.
Conclusion
    Again, NRF greatly appreciates the opportunity to appear before you 
today. In sum, we urge this Committee and Congress to continue to 
encourage transparency in health care to help drive better quality and 
lower cost care and coverage.
    At the same time, we urge you to guard against the pace of ACA 
implementation and the consequent potential to drive employers away 
from providing coverage. Retailers and other employers can and should 
be powerful advocates for positive change. But, in most cases, health 
care and health benefits are not our stock in trade or business. It is 
in our best interest to keep our employees healthy and at work, but not 
at any cost. The ACA will--at a minimum--pressure our ability to 
continue to provide coverage and help drive positive change.
    We hope to work with you to help mitigate these effects. NRF stands 
ready to help the Administration and Congress make the ACA more 
workable, so long as it remains the law of this land.

    The Chairman. Thank you very much, sir.
    It seems to me that, in preparing for this, I read that--
and you were concerned, Ms. Quincy--that we have to get to 170 
million people. And we're not. And I think that's partly 
because it's still new, and, you know, all this kind of stuff. 
But, my impression was that, if you took the cost, which you 
referred to, of doing all of this transparency, et cetera, it 
is large and burdensome--I think that it came out that it was 
about 50 cents a person per year. And that actually does add up 
to $70 million, or whatever it is. But, in terms of the 
individual, if that's what it costs, it would seem to me that 
the tradeoff for knowing more about what you're getting--I 
mean, I really get an amazing feeling, just looking at this 
thing.
    Senator Thune, I've been doing this.
    And you--you know, it just--it's just so sensible. You look 
down at--well, having a baby. And you get the sample care 
costs. Now, I assume--and it gives--it says, the amount owed to 
providers is going to be 7-and-a-half-thousand dollars; plan 
pays 5,000-and-a-half, patient pays 2,000. But, it gets all--
radiology, prescriptions--it gets all those things. And then it 
says what the patient has to pay--and it says ``deductibles,'' 
gives the amount; ``copays,'' gives the amount; 
``coinsurance,'' and gives the amount. What it does not say, 
and what I want to bring up in a question, is--and I don't know 
why it's left out--is that we don't include premiums. And it 
seems to me that premiums ought to be a part of the SBC. It's--
I think it's only fair. And so, therefore, it doesn't show up 
here, and, therefore, it's a--that's, I think, one area where 
we could be--we could improve.
    But, I understand your point, and I--I had a--spent an hour 
and a half yesterday, somebody, in HHS, who had just put out 
600 pages of new rules and regulations for something, and I was 
just flying around the ceiling, in anger. And, of course, there 
was a strong defense on her side, which she felt was OK, and I 
just didn't. So, I mean, I think that's constantly a problem.
    I think it's going to--I think it's going to be a problem, 
too, as we settle into--I mean, in effect, it was last year--
October 31, I think--when the Affordable Care Act actually went 
into business, became operational. But, in fact, it isn't, and 
it's really 2014.
    Now, there's a lot that's already been done, but it's when 
you--when you get the exchanges, and getting them set up, and 
having the states figure out what they're going to do about 
that. And some things--again, medical loss ratio and, you know, 
preexisting conditions--those things are already in play and in 
effect. But, I suspect that there will be a period, probably of 
a decade or so, where we will be adjusting this bill according 
to, you know, common sense and reasonableness, while still 
driving toward the purpose of transparency.
    I don't have much time left.
    The--I really like the idea, I have to say, of real-life 
examples, because I think if somebody picks this up, and they 
look at having a baby or diabetes 2, et cetera, and they really 
get a sense of what it is--and I mentioned, in my opening 
statement, breast cancer. And the breast cancer was excluded as 
part of this list by, oddly enough, IRS, the Department of the 
Treasury, and Department of Labor. I have absolutely no idea of 
how they got to do that. Do any of you? Because, to me, breast 
cancer is something that has to be faced by so many people that 
it would really be good, as a real-life experience, in the cost 
of care. And----
    Yes, ma'am.
    Ms. O'Kane. Well, I'm speculating, but breast cancer, as 
you're probably aware, it depends on how serious the breast 
cancer is, what the costs are going to be. So, it's probably 
hard to have sort of a generic example of what it would cost. 
That's--that would just be my speculation. You know, so if 
you're--if you were--had your breast cancer on a mammogram at a 
very early stage, there would be a lumpectomy, there might not 
be any chemo, there might not be any radiation. And that would 
be a--sort of a low-cost event. Whereas, if it were something 
more advanced, there would be much higher costs of treatments, 
and so forth, so----
    The Chairman. Well, it would be my assumption--and then 
I'll go right to you, Ms. Quincy--that this would be based upon 
the average cost. This wouldn't be individual breast cancer, 
but writ large, and then cut right across the middle.
    Ms. O'Kane. I just think, because there's a big range of 
variation that feeds into that average, it might not be as 
useful as having a baby. I'm just----
    The Chairman. Yes.
    Ms. O'Kane.--thinking out loud, here----
    The Chairman. Yes, ma'am.
    Ms. Quincy. We are so fortunate, with this particular 
provision of the law, because we have so much evidence. We did 
test a breast cancer example when we were testing the form. It 
was for a year's treatment that totaled to about $100,000. And 
two things I might mention. One, it's--this was the most 
persuasive example, because that's where it really reminded 
people that, ``Oh, a very expensive and unexpected medical 
event could happen to me.'' Even the men, who can't get breast 
cancer. Still, it reminded them why they need to go out and buy 
health insurance. And, frankly, I said to the health plans, 
``This is--should be your marketing tool. You know, drum up 
some business with these examples.''
    And it doesn't matter if it is your exact breast cancer 
experience. What matters is, you can compare it across health 
plans, because it was calculated in the same way--just like 
EPA's miles-per-gallon sticker on cars. That's what is 
important, at the end of the day. And hope that an expensive 
example, like breast cancer, will be brought back. So, thank 
you for mentioning it.
    The Chairman. Thank you. My time is up.
    The Ranking Member, Senator Thune.
    Senator Thune. Mr. Chairman, thank you.
    And thank you all for sharing your thoughts and your 
insights. I very much appreciate that.
    I'd like to direct this question, if I might, to Ms. 
Quincy. And it has to do with the agency's final rule, which 
was jointly issued by HHS, Labor, and Treasury, which does not 
require that the SBC include premium disclosures or additional 
facts that may affect premium rates. The only way that an 
issuer can comply with other sections of Federal law and 
premium rate changes is to issue disclosures on multiple forms.
    Now, we've heard, today, that multiple disclosures can add 
to consumer confusion. So, to your knowledge, as a consumer 
representative with the National Association of Insurance 
Commissioners, tell me about NAIC and any efforts they made to 
consolidate these disclosure requirements. And is this a 
concern that the agency should revisit as they work to improve 
the SBC disclosure process?
    Ms. Quincy. Thank you very much for that question.
    When the NAIC was working to develop the form, it included 
a line--the very first line on page 1 was for the premium, 
because that's the natural thing that you would want to know, 
in addition to how much coverage you're getting, if you're 
trying to compare health plans. And that's the intent of this 
form.
    So, we did test a premium line on there. And that was, as 
you can imagine, very well received. The NAIC had extensive 
discussions about how to accommodate the fact that, when there 
is underwriting, you might not actually know the final premium, 
and they provided, to HHS, a set of rules for how to 
accommodate those circumstances.
    Just as an example: on Healthcare.gov, you don't see your 
specific premium, you see a standard premium rate. That's one 
of the ways you could fill in that line.
    I think this would be an excellent area for some statutory 
revision, because I think consumers would love to see premium 
on that form.
    And let me know if that didn't answer your question.
    Senator Thune. How do you take into consideration regional 
differences, in the disclosure process? Getting treated in 
someplace like Sioux Falls, South Dakota, is very different 
than getting treated in New York City. I hope implementation of 
this provision doesn't have the unintended effect of confusing 
consumers. Can you explain how regional differences in the cost 
of care are going to be addressed?
    Ms. Quincy. Absolutely. The--first of all, I--for what it's 
worth, I have no concerns that it would confuse consumers. You 
already have regional differences in the coverage provisions; 
you know, so you already are designing an SBC form for the 
exact product that's be licensed--been licensed in South 
Dakota, as opposed to--I forgot, was New York the other 
state?--as opposed to the second State. So, you're already 
preparing a form that reflects the product that you had 
approved by your local State insurance department.
    But, that--your question is still a valid one, because we 
know, in 2014 and forward, there are still some remaining 
premium rating factors, such as geography and age. And I think 
the question is, How do you accommodate them? And I think there 
are a number of things that can be done:
    One, you can put the premium line back on the form, label 
it as ``Premium,'' and leave it blank, to be filled in. If--
let's say a consumer's working with a broker. Sooner or later, 
a premium will be calculated for that person, and it can be 
written on the form so that they can take it home and compare 
it to other plans.
    There's a number--this is the exact question the NAIC dealt 
with, and I would be happy to send to the Committee their 
proposal for how that would be addressed, if--rather than go on 
and on--if--would that be helpful?
    Senator Thune. That'd be fine, yes, thank you.
    Mr. Trautwein, in your testimony today, you mentioned your 
concern with the pace of implementation of provisions in the 
Affordable Care Act. And specifically, you state your concern 
that last-minute regulations, on top of penalties and 
regulatory burden of existing ACA regulations, might cause of 
your members to, and I quote, ``back out of coverage.'' This a 
very troubling suggestion. Provisions, such as the SBC, are 
intended to increase choice and competition in the healthcare 
insurance industry, with insuring benefits to the consumer. But 
the way in which the statute and other mandates fund the law, 
or implement it, could drive employers away from offering 
health benefits altogether. It would seem that the opposite 
could be true. I wonder if you could expand on that statement 
that you made in your remarks.
    Mr. Trautwein. Thank you, Senator.
    There is a lot of frustration out there in the employer 
community as they look forward across the horizon to 2014. I'm 
spending a lot of time on Webinar presentations and other 
methods of explaining this to them.
    When they look at the combination of different factors--
they look at the size limitations, the redefinition of the 
``full-time employee,'' some of these concerns--then it gets to 
be--there's--there starts to be some focus on, ``Well, is it--
can I look to offload my employees onto the exchange? Is it 
mathematically cheaper? Does it make sense, in today's economy, 
to do that? Or do I continue to soldier through and continue to 
offer coverage?''
    So, what I particularly fear--one of the things employers 
hate more than anything is having multiple requirements put on 
them at once so they're trying to do a bunch of different 
things at the same time. That's what the quick horizon to 2014 
threatens--I fear, threatens--because we don't want to undercut 
employer-sponsored coverage, but I think that could be the 
practical effect.
    Senator Thune. I see my time has expired, Mr. Chairman. 
Thank you.
    The Chairman. All right.
    Senator Pryor.

                 STATEMENT OF HON. MARK PRYOR, 
                   U.S. SENATOR FROM ARKANSAS

    Senator Pryor. Thank you, Mr. Chairman.
    And I'd like to start with you, Ms. Quincy, if I could. One 
of the amendments that I offered, and it was adopted into the 
ACA, was an amendment on a customer satisfaction survey. And 
I'm assuming, you know, it'll take a little time, maybe a year 
or so, before the exchange is running, and all that, before the 
surveys really mean a lot. But, do you think that information 
will be helpful to consumers as they are weighing their various 
options in the exchange?
    Ms. Quincy. Yes, I do. And just so I give you a responsive 
answer, are you talking about satisfaction with the exchange or 
with health plans?
    Senator Pryor. Well----
    Ms. Quincy. Or both?
    Senator Pryor. What--I was thinking about with the health 
plan.
    Ms. Quincy. OK. In the testing and discussions we've had 
with consumers, they're very interested in what other people, 
like themselves, think of a given health plan, a given doctor, 
a given hospital. This is a primary piece of information that 
they're interested in. And I think that, referring back to 
Peggy's testimony, if we can do the survey and convey the 
results in a way, to consumers, so that it's usable and they 
feel this reflects people who are just like them, they would 
find it very, very valuable.
    Senator Pryor. Right.
    Mr. Livermore--oh, yes, ma'am. Ms. O'Kane.
    Ms. O'Kane. Just on that point. We accredit health plans, 
and every health plan has to submit results of their consumer 
satisfaction survey, which is then used to benchmark and 
compare, and it leads into the rating that the plan gets. And 
then we take the data, and we do ratings with Consumer Reports.
    Senator Pryor. Oh, good. Seems to me that it's--that's a 
good way to go. It, you know, lets consumers get a read of, you 
know, how the plan is actually working in the real world.
    Mr. Livermore, let me ask you a question. And it's really a 
concern I have. And that is--my concern would be that there 
will be a lot of people, especially in the early days of this, 
that aren't really familiar with shopping for their own 
healthcare plan, and they may just look at the premium, and 
then nothing really beyond that. You know, they may not look at 
all the copays and all the other--what folks who know about it 
wouldn't consider ``hidden expenses,'' but, if you're not 
careful, they might be considered hidden expenses. So, do you 
share that concern? And, kind of, what are our best practices 
that we can implement that would make sure that that's not a 
big problem?
    Mr. Livermore. Yes, I absolutely--thank you for the 
question--I absolutely do share that concern. I think that it 
really points to the need for evidenced-based models and 
testing of how the label actually works. In the abstract, as 
experts, you can look at it and say, ``This is all perfectly 
clear; it's obvious,'' but that doesn't mean that that's how 
consumers are responding to it. So, I think that that really, I 
see, is the key--a key feature for improving and continually, 
you know, expanding this--the use of this label, is that 
ongoing testing and procedure.
    Now, there are certain things that you can do to make sure 
you're using best practices. Right? So, information that you 
present first is going to have a large cognitive impact, you 
know, on someone that's interacting with this document. So, you 
know, you can use color, simplify language, not overwhelm the 
consumers with too much information, so you have the most 
salient information. Coverage examples are an important--can be 
an important counterbalancing influence. So, all of these are 
features. But, at the end of the day, testing is what we 
ultimately--and improving, based on that information--is 
ultimately how we answer that concern.
    Senator Pryor. One of the things that you mentioned in your 
testimony is ``low health literacy'' in the U.S. And apparently 
there's a pretty substantial cost connected with the 
illiteracy, I guess you can say, of--in healthcare, for 
Americans. So, what's the low hanging fruit there? What can we 
do to make the American public more literate when it comes to 
choosing healthcare?
    Mr. Livermore. Well, I think that, in terms of steps 
forward, expanding the coverage examples are a very useful low 
hanging fruit; in particular, a high-impact event, because 
that's something that consumers are not going to be familiar 
with, by its very nature. These are low-probability events, and 
then they're extremely high-impact. And, you know, a consumer 
making the decision is not familiar with that. They might not 
even have family members that are--where they can utilize that 
experience. So, I think that that is a simple thing that can be 
done, and it's low hanging for us.
    Senator Pryor. Yes, ma'am.
    Ms. O'Kane. We heard a presentation from somebody that was 
experimenting with how to present the information to consumers, 
and they found that just giving a little tutorial up front 
about, you know, what to think about before you get into it was 
helpful. And then, there are choice tools, as well, that help 
you calculate what your total expenditure for the year might 
be. Those have been used.
    So, I think that, actually, the experience of shopping in 
exchanges can be something that will improve people's health 
literacy just in time, if we do it the right way.
    Senator Pryor. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Pryor.
    Senator Cruz. And welcome.

                  STATEMENT OF HON. TED CRUZ, 
                    U.S. SENATOR FROM TEXAS

    Senator Cruz. Thank you, Mr. Chairman. And it is a pleasure 
to be at that--the first hearing that I've had the opportunity 
to serve on this committee.
    Of all of the economic data that swirl about, the one I 
find most troubling is 0.8 percent, which is what our economic 
growth has been, each of the last 4 years. It seems to me, if 
we're going to make progress, in terms of restoring our 
economic strength, if we're going to make progress, in terms of 
seeing the 23 million people struggling to find work, getting 
back to work, we've got to restore economic growth, we've got 
to get back to historic levels of growths--3, 4, 5 percent--and 
not sub 1 percent economic growth.
    And so, Mr. Trautwein, I would like to ask you a question 
about the impact of the President's healthcare law on small 
businesses, in particular. There have been a number of 
estimates that small businesses typically produce two-thirds of 
all new jobs. And the House Energy--Commerce Committee has 
recently estimated the compliance cost of Obamacare has 
exceeded 127 million man hours. And the question I'd like to 
ask is if you could share your experience, and the experience 
of your members, in terms of the impact of compliance costs, 
and how that is affecting their ability to survive in this 
challenging economic times, and their ability to create and 
maintain jobs.
    Mr. Trautwein. Thank you for the question, Senator.
    The small business is struggling to understand their 
responsibilities under the new law. They're coping with 
questions about how you're defining ``full-time employee.'' How 
many employees can you have before you're over the top? Do you 
count partial employees to get up to that 50 limit of full-
time-equivalent employees? So, there are a lot of issues, at 
present.
    We do know that it's had an effect of discouraging growth 
at companies near that threshold, and it may have an effect--in 
fact, somebody called them the ``29ers''--of redefining many 
employees below that threshold. And that could be an issue, as 
well.
    Counterposed against that are the small business tax 
credit, limited or--and complicated though it be. And there are 
also subsidies potentially available, by income, in the 
exchange, though those ramp out pretty quickly.
    So, it's--so, to sum, there's a lot of frustration with the 
complexity of the Affordable Care Act. It may be having an 
effect on job growth, particularly in small business. And 
they're very nervous about this transition.
    Senator Cruz. What has been the experience of your members, 
to date, in terms of small businesses dropping coverage 
altogether? Have you seen that as a significant pattern since 
the passage of this law?
    Mr. Trautwein. It's been more of a episodic adventure, 
Senator--or feature. From what I can tell, the--even though 
we're in 2013, as of June, counting back for the look-back 
period, really that the penalties are not effective until 2014, 
forward. So, I've encouraged many employers, some who are 
grandfathered status and some who are not, to ride it out, for 
now, and to keep coverage intact. But, there are a lot--as I 
mentioned, there's a lot of frustration, a lot of--particularly 
in small business--who say, ``My business is X, not 
healthcare.'' And so, there's a lot of frustration there.
    Senator Cruz. My last question concerns the cost of 
coverage; and, in particular, the cost for those struggling to 
climb the economic ladder--young people coming out of school, 
getting their first jobs.
    A recent study by the American Academy of Actuaries found 
that insurance premiums in the individual insurance market will 
increase, on average, by 10 to 20 percent, and approximately 4 
million uninsured individuals age 21 to 29, or roughly 36 
percent of those currently uninsured, can expect to pay more 
out of pocket for single coverage than they otherwise would 
have.
    Has that been the experience you've been seeing in the 
market? That the impact has been coverage costs increasing and 
impacting, in particular, those struggling to climb the 
economic ladder?
    Mr. Trautwein. There's been some, but a limited, increase 
already reflected in the market. One of the things I worry 
about is the regulation released on Friday on health insurance 
market reform, and the compression of age rating bands from, 
commonly, 5-to-1 to 3-to-1. That's going to increase premiums 
for younger, healthier employees, the kind that you want in 
your group, three times or more. And that could have an effect 
on overall group coverage.
    We advocate--and the administration said they lacked 
authority to do this--but, a more effective way might be to 
allow the States to come up a plan--with a plan, maybe 5-year 
plan, to get to that target amount. But, hopefully that's 
something that the Congress will come back to, because that 
potential rate shock could be an issue--substantial issue in 
2014 and beyond.
    Senator Cruz. Thank you very much, Mr. Trautwein. And thank 
you, to all of the witnesses.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator McCaskill.

              STATEMENT OF HON. CLAIRE McCASKILL, 
                   U.S. SENATOR FROM MISSOURI

    Senator McCaskill. Thank you.
    I know that there are competing arguments on the rate-shock 
argument, also. I mean, we have a huge number of our young 
people that are now on parents' policies until they're 26 years 
old. Obviously, if this reform went away, they would be back on 
the market. That's quite a rate shock.
    And also, the catastrophic--if any of you want to speak to 
the catastrophic coverage that will be available to young 
people, that currently has not been readily to consumers, and 
what impact you think that might have on this reputed rate 
shock that's going to occur for young people.
    Ms. Quincy?
    Ms. Quincy. I'd be happy to speak very briefly. I mean, 
excellent comments. But, the Wyman study and the Society of 
Actuaries study--there are some other studies out there that 
show that this rate shock concerns are going to be mitigated by 
the availability of subsidies to help afford coverage and, as 
you mentioned, by the availability of a catastrophic plan. And 
this catastrophic plan is essentially going to be full of young 
people. They're their own pool; they're not pooled with others. 
So, this is going to mitigate, greatly, the impact of the rate 
shock, because--some of the other studies didn't take that into 
account; like, I don't think the Wyman study did.
    I'd be very happy to send over to this committee a study by 
the Kaiser Family Foundation and another one by the Urban 
Institute showing that maybe we don't need to be quite as 
worried as some have suggested.
    Ms. Quincy. And I'm not trying to say that there will not 
be some people for whom their rates go up. Sometimes it's 
because their coverage was so much better. But, I don't think 
the problem is necessarily as great as some of the reports 
show.
    Senator McCaskill. Thank you.
    I have also read the Time magazine article, and I will tell 
you, I think that there is a rebuttal that is--needs to be put 
out there on some of the things that are in that article. You 
know, points were well made in the article, but there is 
another view on some of these issues around the not-for-
profits, especially those that are serving the most difficult 
populations, in terms of underinsured and uninsured. And I want 
to make sure that the policy discussions around this are fair 
and measured.
    Now, one thing that was in that article that is fascinating 
is the charge master. The charge master, obviously, came about 
for a purely commercial reason, and that was: insurance 
companies wanted to go to employers and say, ``We're getting 
you a big discount.'' So, in order for them to get a big 
discount, the charge master had to increase what the charge was 
for the service.
    So, let's say an MRI was going to be $400. That's what the 
costs really were going to be. And the insurance company said 
to the hospital, ``Well, we really need to tell our employers 
that we're getting you a better price, so we need to say we got 
you a discount,'' and they said, ``OK, we'll have a charge 
master say the charge was $800, and you're getting a 50-percent 
discount.'' So, it was all illusory. It was all kind of made 
up. And----
    But, the point that the article wasn't very good about 
pointing out is that that is really only being used for 
outliers now, because the vast majority of the charges now are, 
in fact, for procedures. There is a set amount for procedures.
    And if any of you would comment on what we need to do, in 
the transparency world, to get companies out of the habit of 
creating discounts that totally jack around with the ability of 
a consumer to ever figure out what something really costs. And, 
you know, maybe we need to look at this issue of--I think 
they've outlived their usefulness, charge masters; I don't 
think they are being used as often as they were when this first 
began as a practice. And I would like any of you who feel 
knowledgeable about this subject to speak to that.
    Ms. O'Kane. I don't think I'm an expert on this, but I 
think--your point is really well taken. It's really hard to 
figure out. Right? And different payers pay different amounts, 
which have nothing to do with the underlying value of the 
product. We have markets where there's so much consolidation in 
the provider sector that they kind of name their prices, and 
that goes right through to the consumer.
    So, I think that there is a big issue around price. There's 
a big issue around what we do, as well. But, you know, the 
issues that he identified in the article, I think really do 
call for some public-policy response. And, you know, there's a 
range of possible responses, like you could set prices. That 
seems sort of--kind of politically unlikely, to me. But, 
certainly, I think that the current----
    Senator McCaskill. We have set prices for Medicare and----
    Ms. O'Kane. Yes, exactly.
    Senator McCaskill.--Medicaid, right?
    Ms. O'Kane. Exactly.
    Senator McCaskill. I mean, that's what they've done----
    Ms. O'Kane. Yes. But, then----
    Senator McCaskill.--is set prices.
    Ms. O'Kane. But, then we find that providers then shift 
those costs over to the private sector, driving up the cost of 
private health insurance. And----
    Senator McCaskill. Yes. I mean, I believe that if you look 
at it--if you back up, you've got a population that's paying 70 
percent of what the costs actually are, and another population 
that's paying 130 percent of what the costs actually are.
    Ms. O'Kane. Right.
    Senator McCaskill. Well, that's certainly not fair to the 
people who are paying 130.
    Ms. O'Kane. Right.
    Senator McCaskill. But, it's a great value for the 
government, that's getting the 70.
    Ms. O'Kane. Yes.
    Senator McCaskill. And so, how we figure that out--and 
people who are in large companies that have lots of employees 
are getting the 70.
    Ms. O'Kane. Well, no, actually, they're--they're paying 
higher--they're paying higher rates, because they're buying--I 
mean, they're self-insured, but they're only able to get the 
rates that their intermediaries are able to negotiate, which 
are not as low as Medicare rates. They do better, though, than 
the small businesses----
    Senator McCaskill. Right.
    Ms. O'Kane.--which are really at the end of the----
    Senator McCaskill. They're not at the 130, but they're not 
at the 70.
    Ms. O'Kane. Right.
    Senator McCaskill. They're somewhere in between.
    Ms. O'Kane. Right. Right. But, I think it's a mess, and 
it's certainly--you can't have a market that actually works, 
when you have this kind of disinformation out there.
    Senator McCaskill. Well, I'm a big--I know my time is up, 
and I appreciate you being here--I'm a big believer that one of 
the most important things we have to do in the healthcare area 
is unleash the American consumer. I mean, we are good shoppers. 
We know how to shop. I mean, you give me enough coupons, and 
I'll drive 15 extra minutes and get that value.
    You know, look at Groupon. I mean, look at the successes 
that we've had by--you know, I mean, look at Wal-Mart, for gosh 
sakes. So, I think we've got to figure out a way that the 
American consumer feels entitled to consumer information about 
buying healthcare. Right now, they just see it as something 
they either get for free or they don't have it and somebody 
else is going to pay for it----
    Ms. O'Kane. Right.
    Senator McCaskill.--instead of really feeling invested in a 
consumer-based decision. And a lot of that is just around the 
area of can they get enough information to become a good 
consumer?
    So, I think this is a great hearing, Mr. Chairman, and I'll 
look forward to hundreds of other great hearings, with--under 
your leadership, over the next several years.
    The Chairman. Hundreds.
    Senator McCaskill. Hundreds.
    [Laughter.]
    The Chairman. Senator Schatz.

                STATEMENT OF HON. BRIAN SCHATZ, 
                    U.S. SENATOR FROM HAWAII

    Senator Schatz. Thank you, Mr. Chairman. And thank you for 
holding a hearing on this--OK, excuse me. Here we go.
    Thank you, Mr. Chairman, and thank you for holding a 
hearing on this important topic.
    I want to thank the witnesses for being here.
    And I share your view, Mr. Chairman, that greater 
transparency in health insurance policies is needed for 
consumers to better make choices.
    I have a couple of questions that have to do with the 
process of making choices. Mr. Livermore, in particular.
    According to Census data, approximately 25 million adults 
in the United States don't speak English well. And in Hawaii, 
limited-English-proficiency individuals account for almost 12 
percent of the State's population, including my mother- and 
father-in-law. Health insurance companies have to communicate 
effectively with this percentage of the population in order for 
this enterprise to work. So, what steps can be taken to make 
sure that those folks who are having difficulty with English 
can get access to plain and simple information so they can make 
the right choices?
    Mr. Livermore. Yes. Well, thank you very much for that 
question.
    I think there are two elements to this. One is making sure 
that we're providing the information in the languages that 
people speak and they can actually understand, but the second 
part has to do with making sure that folks are aware, within 
these communities, that this information exists and is 
accessible to them. So, there's the provision, but there's 
also, kind of, outreach--there's an outreach element to that. 
And, actually, Ms. Quincy mentioned, earlier, that an 
unfortunately low percentage of people are aware that the SBC 
exists. I don't have data on this; she may. But, my--I suspect 
that, within particular linguistic communities, that number is 
even worse. Right? And so, we have to think about how to do 
that outreach.
    That would be my primary recommendation, would be, not just 
the provision of information, but making sure that folks are 
aware that the information is out there and accessible.
    Senator Schatz. Ms. Quincy?
    Ms. Quincy. An excellent question. I think--a couple of 
additional observations. One, the fact, with the SBC, that 
we're talking about a standard form helps, because even if you 
struggle a little bit with--maybe it's--hasn't been translated 
into your language, you can learn, because it's always 
standard, where the given information is. Somebody could help 
you with that. So, we're a little bit ahead of the game by 
having a standard form.
    I would pile onto what Mr. Livermore said by saying, in 
addition to translating these documents, we need to test them 
with people who speak that language, because you never know 
what cultural references may not come through.
    I did a study, years ago, and they were trying to explain 
what ``radiology'' was to someone who didn't speak English, and 
they said, ``It's like a fire going through your body,'' and 
that did not go over well.
    So, there you go.
    Senator Schatz. Thank you very much. And I appreciate the 
cultural-competency layer to this, because it's not just 
language translation, but it's understanding the dialects 
within ethnic communities, and just understanding that there 
may be different attitudes toward healthcare and the provision 
of health services, that all needs to be baked into this 
process.
    I have another question about accessing this information. 
You know, the first draft of SBC is in print format. And, as 
you know, many low-income individuals, and individuals at all 
income levels, are going to be accessing this decisionmaking 
process via the Internet. So, I'd like you to talk a little bit 
about the usability thought process, not just for the Internet, 
generally, but also the potential differences between desktop 
and laptop computers and PDAs. Increasingly, especially in low-
income communities, because they don't want to pay the monthly 
for their Wi-Fi or their Ethernet connection, the only way 
they're going to get information such as this is via an iPhone 
or some other Smart phone.
    So, what thought process is being undertaken to making sure 
that this information, which is extraordinarily complicated, 
gets distilled into this little 2x4 screen?
    Mr. Livermore. Just as an initial take, I think that 
distilling information is, at some level, the first cut--
getting it down into, you know, the compact information you 
want to--that you want to communicate to consumers, and then 
making sure that it's available on a wide range of platforms. 
All right? So, this is kind of a two-step process, and I think 
we're in the midst of that second stage of making sure that 
it's, kind of, platform availability, in addition to the 
information.
    Ms. Quincy. If I can pile on--my favorite occupation--I 
think--I may just not be creative enough, but I can't conceive 
of how you would actually get, like, the full content, that you 
would expect to see, for example, at an exchange, on a little 
phone. But, I think that it could play a very useful role, in 
terms of raising awareness and providing preliminary 
information that then links people to help. You know, it links 
them back to a full Website, it links them to live assistance. 
And that's what I see as the role for this very small screen.
    Senator Schatz. Right. I--and I agree. I actually think the 
Web-based and the PDA-based decisionmaking tools ought to be 
used as an interactive decisionmaking tool, because, you're 
right, you can't load all the information onto one or several 
pages. But, in a way, it could be even more useful, because you 
could take someone through their decisionmaking process in a 
way that is step-by-step, and, therefore, more user-friendly, 
rather than giving them a document and asking them to digest 
it.
    Thank you.
    Thank you, Mr. Chair.
    The Chairman. Thank you very much, Senator.
    I'd like to make a comment or two, I guess, emanating out 
of some of the things that Senator Cruz said, and also that you 
have said, Mr. Trautwein.
    And I think we've all been through this before. You get the 
situation where--Senator Thune and I are working on this--
that--called cybersecurity, when it's the greatest national 
security threat, it is greatly in advance of terrorism of 11--
you know, 9/11s, et cetera, but somehow it doesn't get through 
to the American people, so we're trying to do something about 
it. And then you get a deluge from the Chamber of Commerce, 
the--by their paid lobbyists, here in Washington, which crushes 
any attempt to get any amendments passed. We couldn't get 
anything done.
    So, I wrote a letter to 500 of the top, you know, 
individual companies in America, and the majority of them said, 
``No, we're not protected. We don't know what to do. We need 
help.'' These are big companies. ``And we don't know where to 
turn.''
    And then, the Chamber of Commerce turned on them--you know, 
the GEs of this world, or whatever--and said, ``Well, they 
don't really know what they're talking about.''
    And I have, a little bit, this feeling on this healthcare 
discussion, that this behemoth--I think you have to start with 
the knowledge of what an absolute disaster of cost, waste, 
fraud, and abuse, of duplication, that our present healthcare 
system is. Let's start with what we've got.
    I still remember Richard Darman. Do you remember Richard 
Darman? Yes. He was head of OMB under Ronald Reagan, and he 
came and testified for the Finance Committee, and he went into 
sort of a seclusion for a week before he testified, and he 
appeared, sheet white, not because he wasn't feeling well, but 
because of what he'd learned. And he basically told us--this 
was, what, 15-20 years ago--that healthcare was going to 
decimate the American economy; it was just going to eat it up; 
there would be no money left for even a single Tootsie Roll. 
And I always remember that, because the healthcare system was 
in a mess then; it's in a greater mess now, while, at the same 
time, not providing insurance for a whole lot of people who 
really need it.
    So, when people start talking to me about, ``This is just 
going to be the downfall''--I was very intimately involved with 
the writing of this bill, and there certainly are areas where 
we can make improvements, but, you know, where--you were 
talking about small business. Ninety-six percent of the 
businesses in this country with more than 50 employees already 
offer health insurance to their employees. And RAND, the Urban 
Institute, the CBO, and Mercer, which is a county in West 
Virginia--and otherwise, I guess, a research firm--have found 
that the vast majority of those employers will continue to 
offer their employees health insurance in 2014. In other words, 
they listened to all of these comments about--the end-of-the-
world comments, and--but then they look at what they have, and 
they said, ``My gosh, it can't be worse than what we've got.'' 
Plus, they aren't providing health insurance to the people that 
they would like to.
    Then you look at the law, at the Act. Starting in 2014, 
businesses with fewer than 50 employees will have a new option 
available to them. To all of them. And it's called the state 
exchanges. So, anybody can go get health insurance; again, 
using these new slimmed-down reading materials and information. 
And then, if you're--if you have fewer than 25 employees, you 
already get a--you already get a deduction--a credit, I guess 
it is, isn't it?--for 30 percent of the cost of--the government 
helps, in the bill, already law, with the--with 30 percent of 
the cost of providing health insurance. And in 2014, that goes 
to 50 percent. And it stays there.
    And then I think of the fact that, well, there's going to 
be 32 million uninsured Americans--which doesn't get to the 
underinsured Americans--who are going to be plowing money into 
the insurance companies, because they're--they now have 
insurance coverage--they have health insurance coverage; and 
all kinds of things happen. And then, I think of, oh, yes, and 
they're going to take those Medicaid doctors, who everybody 
says are going to stop serving Medicaid patients, but, lo and 
behold, what does the Act do? The Act brings it--for 
practitioners out there, it--Medicaid, and particularly in 
rural areas, which would be of interest to South Dakota and 
West Virginia, their payment levels will go up where Medicaid 
is now--Medicare is now. So, that may not sound sensational, 
but if you're getting Medicaid reimbursement levels, that's 
just about the best news you've ever heard.
    And we're--there's--money's already in there, already paid 
for, for building--is it 1,000 or 10,000 new healthcare 
centers? 1,000, OK. Nuts.
    [Laughter.]
    The Chairman. But, in other words, when I went to West 
Virginia as a VISTA volunteer, I'd--and the people I was 
working with lived off of a rural healthcare center, across a 
couple of swinging bridges in a neighboring rural county. And 
there they got grassroots--you know, an old Wal-Mart, except it 
wasn't as big as that, but, you know, ground-floor stuff, like 
Vet Centers for veterans--ground floor. Not VA hospitals; they 
don't like that. Go to a ground-floor thing, they're--you get 
friendly folks there.
    And so that all these--you know, ways to be helpful. And 
the fact that people who are finding healthcare difficult to 
navigate, even with this four-page thing that I'm overtouting--
there's going to be--there are going to be people who help, 
people specifically provided for in the bill who help people 
work their way through getting healthcare. That can be to a 
company--small company, large company--that can be do an 
individual. They're a part of the healthcare bill.
    So, I just--I would just say that, before we just 
obliterate an Act which has been validated by the Supreme Court 
and is going to stay--I always kind of prefer to get on the 
side of what makes things better. And, yes, when you do 
something as big as this, affecting 16-17 percent of the 
economy, there's going to be some sticker shock and some 
changes that have to be made, and everybody gets nervous, 
because it hasn't happened yet.
    But, all those folks who aren't getting nervous, in the 
business community, about something called cybersecurity, when 
they get attacked--which most of them have been, actually--when 
they get attacked in a major way, and we shut down air traffic 
control systems and towers and grids and things of that sort, 
then people are saying, ``Oh, my heavens, why didn't we pay 
attention to this when we had a chance to do something about 
it?''
    Now, that sounds a little bit like a lecture, and I 
apologize for that. That's--is that my nature?
    [Laughter.]
    The Chairman. But, I really mean that. It's not just what--
where we're going, it's where we are; and you have to look at 
both of those things. And I would just beg for that kind of--
it's sort of automatic opposition. I think there's going to be 
a far simpler way of doing the healthcare system.
    My time is way over.
    Senator Thune.
    Senator Thune. Mr. Chairman, if I might--I think the one 
area, although you and I have different positions on the 
Affordable Care Act, in its passage--one thing that I think we 
all agree on is that more transparency is a good thing. I think 
the efforts that you've made to try and get more information 
out there is good, because it does help consumers make informed 
decisions.
    I've always believed that the more the consumers have an 
opportunity to weigh what the competitive opportunities are out 
there, they will choose the lowest-cost option that still gives 
them the coverage, if it's insurance, or in the case of 
healthcare itself, the healthcare that they want, that delivers 
the quality product at the most affordable price. That's why I 
do think more information transparency is a good thing. And I 
think that having more skin in the game, so to speak, is a good 
thing, too, because it forces less utilization.
    One of the things, I think, that really drives healthcare 
costs in this country is that we have an insatiable demand for 
healthcare. We've got some great technology out there, the best 
in the world. And people want to take advantage of that 
technology and that healthcare. But, we also have some 
duplication out there. A lot of things can be improved upon, in 
terms of delivery of healthcare. I do believe that transparency 
and disclosure is helpful, with regard to trying to keep prices 
affordable, something that most people in this country can 
appreciate.
    Let me if I might, seek just one final comment and reaction 
from Mr. Trautwein--because I do think that, notwithstanding 
some of the elements, like the transparency provisions that you 
fought to get in here, and some of the things that we're 
addressing today, there are a lot of mandates in the bill, and 
a lot of requirements. I think Mr. Trautwein addressed a few of 
those. This is one requirement, which I think is very popular, 
and one which I think, in the end, will get more information 
out there. But, there are other mandates that I believe are 
also going to put upward pressure on the cost and the price of 
healthcare in this country. There are about 60 percent of 
American workers that are in self-insured plans, which are 
governed by ERISA.
    One of the things that I'm interested in knowing is whether 
Title I of ERISA already are mandates of distribution of 
Summaries of Plan Description. How are, I would say to Mr. 
Trautwein, your self-insured members dealing with what could be 
duplicative mandates from both ERISA and the new healthcare 
law?
    Mr. Trautwein. Thank you, Senator.
    From--it's not clear to me that they're not required to 
produce both documents. And, in fact, all group health plans 
are required to produce an SBD as well as the new SBC 
requirement. So, that's something that stretched beyond the 
self-funded plans, in terms of the obligation.
    Briefly addressing the Chairman's remarks, I would note 
that the NRF was an opponent of this law. We were for reform 
before passage; we continued to be for reform. Once the ink was 
dried on the law, we've been working with the regulators, in 
good faith, to try to ease compliance, make it easier for our 
members to comply with the law. It's a very complicated law, 
and some of the work with Treasury, or with HHS, in particular, 
in implementing it, there are going to be a lot of hoops to 
jump through, and employers don't like that.
    But, from our perspective, we're all about compliance. We 
didn't sue anybody on the Affordable Care Act. We didn't submit 
amicus comments in the Supreme Court. We're all about 
compliance, right now, Mr. Chairman.
    The Chairman. Well, I appreciate that.
    And let me just say, in closing this--I had about 20 
questions I wanted to ask, but didn't--that what you're going 
to see from Senator Thune and Senator Rockefeller is a fair and 
balanced leadership of the Commerce Committee, because we both 
have common values. We both come from the same kinds of States, 
with the same kinds of problems. But, we're different, you 
know, and we view the Act differently. And so be it. That's 
what democracy is all about.
    I remain optimistic on all of this. And I think sessions 
like this one, where people can voice their frustrations, and 
where others can come back and argue, where you have people, 
all of whom are very knowledgeable, and the fact that--are you 
in the Business Roundtable? Yes. And so the--and then--you're 
for it; I didn't know that, and so, I apologize to you for 
that.
    But, these are the struggles we will be going through. I 
mean, if we're trying to figure out how to make a--how do you 
get a fair explanation of a deductible that crosses all 
healthcare--I mean, you know, there's going to be hard stuff, 
and it'll take time. And let's just try and be honest with each 
and do it the best that we possibly can.
    In any event, you've all been terrific, and I thank you 
very much.
    And this hearing is adjourned.
    [Whereupon, at 3:58 p.m., the hearing was adjourned.]
                            A P P E N D I X

 Response to Written Question Submitted by Hon. John D. Rockefeller IV 
                             to Lynn Quincy
    Question. Ms. Quincy, after the Summary of Benefits and Coverage 
(SBC) because law in March 2010, AHIP (American's Health Insurance 
Plans) and then later AHIP together with the Blue Cross Blue Shield 
Association (BCBSA) paid for two separate consumer focus group studies 
to test early versions of the SBC forms. We have attached these studies 
to test early versions of the SBC forms. We have attaches these studies 
for your review. The first round of consumer testing AHIP did focused 
on how consumers interacted with the SBC forms. AHIP's testing found 
that the SBC was ``valued by consumers,'' and that:

        The idea that there might be a standard form or common template 
        that health insurance companies would use to summarize costs 
        and benefits was universally hailed as a great move. All 
        participants felt that they personally would benefit by having 
        a quick read of any given plan and being better able to compare 
        plans. A common template would provide consistency and 
        uniformity.

    In their second round of testing AHIP and BCBSA focused on how 
consumers interacted with the SBC's Coverage Examples. The researchers 
found that:

        [A] majority of participants felt the inclusion of examples was 
        helpful in that it gave them a different way to view, compare, 
        and understand the cost implications of various plans.

    Ms. Quincy, your organization, Consumers Union, also conducted 
focus group with consumers. Were the findings of your research 
consistent with the findings of AHIP and the BCBSA?
    Answer. Thank you for this question. I think it is remarkable how 
similar the findings were between the AHIP/BCBSA studies and the 
Consumers Union studies. This commonality underscores the robustness of 
the findings. All reports are public documents. In the case of 
Consumers Union's testing, outside observers were invited to view the 
consumer testing, lending further transparency to the process and 
findings.
    Our written testimony and the study reports provide a strong 
written record of these findings. I will not reiterate the major 
findings here except to state that they comport with and even build 
upon the AHIP and BCBSA findings. Policymakers can act upon this 
information, increasing and extending consumer access to timely and 
accurately completed SBCs, with complete confidence that these new 
documents help consumers.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Amy Klobuchar to 
                              Lynn Quincy
    Question 1. I really believe in paying for quality. During the 
hearing in 2009, I asked how to incorporate quality measures into 
transparency materials and the response I got was that's 300 level 
learning, we're still at insurance 101. Was there any discussion during 
the development process to incorporate various quality measures?
    Answer. I don't believe so. The NAIC felt it was all they could do 
to use their multi-stakeholder process to meet the statutory 
requirements for the SBC. These requirements don't include quality 
measures, although the Affordable Care Act (ACA) clearly places great 
importance on quality measures in other sections. For example, core 
functions an Exchange must provide include assignment of a price and 
quality rating to plans and the presentation of enrollee satisfaction 
survey results.

    Question 2. With the lessons learned from the NAIC process, the 
feedback from focus groups and the industry, are there steps we can 
take to also start providing consumers with information on quality?
    Answer. Absolutely! The new quality reporting requirements in the 
ACA, and heightened consumer awareness of new health plan options and 
ways to buy coverage, are a golden opportunity to put better measures 
in front of consumers. However, current research suggests that more 
consumer testing of quality measures may be needed to ensure wide-
spread and appropriate use of the measures.
    While quality was not the focus of our own testing, we did solicit 
consumers' views on quality directly and indirectly. Many consumers 
associate health plan quality with (a) comprehensive coverage and/or 
(b) high quality providers in the network. This doesn't mean we can't 
be successful build plan and provider quality measures in other 
domains, but it does caution us that such measures must be carefully 
tested and artfully named so that there use is intuitive and 
appropriate.
    We highly recommend a robust course of consumer testing to see 
which quality measures, broadly defined, will most benefit consumers. 
The broad range of measures to be tested should include a rigorous, 
standard way to measure provider network adequacy and a summary measure 
indicating how providers perform with respect to patient safety, as 
well as the conventional measures used today.
    Research has shown that the performance of individual physicians 
and hospital service lines is strongly preferred by consumers over 
performance information aggregated at physician group of hospital wide 
levels. Work should be done to overcome current barriers to the 
provision of this information.
    Getting quality information into the hands of consumers is 
critically important but much remains to be done to identify the best 
consumer facing measures and make these accessible, understandable, and 
relevant.

    Question 3. Do you think that this would be a useful addition to 
the summary of benefits and coverage documents?
    Answer. We recommend using consumer testing to rigorously answer 
this question. While we are confident that well tested quality measures 
will help consumers, the question of which ones and how to include 
would need to be answered. For example, it is possible that only one or 
two summary measures are appropriate to use in the SBC, with additional 
detail available on health plan comparison websites.

    Question 4. Are there other ways you think these documents can be 
strengthened?
    Answer. Yes! I strongly recommend the following

   Getting the SBC form ``designed'' by a graphic designer 
        versed in these types of communications. My written testimony 
        includes an example of how design changes could improve the 
        form. Consumer testing should be used to ensure that the 
        revisions enhance the experience for the consumer, without 
        reducing the value of the current version.

   Bringing back a row for premium information on the first 
        page, as was included in the original NAIC recommendations. 
        These recommendations provided a robust mechanism for the 
        provision of premium information on the SBC, and reflect input 
        from a wide variety of stakeholders.

   Including more coverage examples as soon as possible, and 
        experimenting with moving this information forward in the 
        document.

   Abandon the use of national Medicare prices as the basis for 
        the coverage example calculations and instead substituting 
        realistic private sector prices; trended to accurate represent 
        costs for the year that coverage will be effective.

    My written testimony contains further suggestions.
                                 ______
                                 
    Response to Written Question Submitted by Hon. Amy Klobuchar to 
                           Margaret E. O'Kane
    Question. I really believe in paying for quality. During the 
hearing in 2009, I asked how to incorporate quality measures into 
transparency materials and the response I got was that's 300 level 
learning, we're still at insurance 101.

   Was there any discussion during the development process to 
        incorporate various quality measures?

   With the lessons learned from the NAIC process, the feedback 
        from focus groups and the industry, are there steps we can take 
        to also start providing consumers with information on quality?

   Do you think that this would be a useful addition to the 
        summary of benefits and coverage documents?

   Are there other ways you think these documents can be 
        strengthened?

    Answer. I also believe strongly in paying for quality and making 
quality information transparent and easy for consumers to use. Focus 
groups that we conducted with the California Healthcare Foundation 
found that with help, consumers quickly understand that quality does 
not necessarily cost more--and that it can cost less. Consumers 
generally do need help to understand this, as it is not intuitive for 
most people. However, once consumers do understand it, they want to use 
cost and quality information together to help them select a high 
quality, low-cost health plan or physician organization. We also found 
that the people most interested in this information are the uninsured 
who will be accessing health care coverage through State Health 
Insurance Exchanges.
    Our report on these focus group findings, Value Judgment: Helping 
Health care Consumers Use Quality and Cost Information, \1\ includes 
important lessons on how to make this information meaningful to 
consumers and move beyond the ``insurance 101'' stage.
---------------------------------------------------------------------------
    \1\ http://www.ncqa.org/Portals/0/Public%20Policy/
CHCF%20ValueJudgmentQualityCostIn
formation.pdf
---------------------------------------------------------------------------
    For example, most people prefer simpler formats that use a symbol 
to indicate overall value, and they want to know the source of the data 
in order to assess its credibility.
    It is not clear whether the standardized Summary of Benefits and 
Coverage would be a good place to provide consumers with quality 
information. Specific testing would be needed to determine if consumers 
wanted quality information there and, if so, how to make it useful to 
them.
    State Health Insurance Exchange web portals, however, are an ideal 
place to give consumers information on quality, along with total cost 
of care. Minnesota's Exchange already has a specific work group 
focusing on this important opportunity. It takes time to measure and 
report on the actual quality of care that plans provide, so Exchange 
plans' quality information at first will be limited to accreditation 
status and patient experience ratings for similar plans offered by the 
same sponsors. Once we can collect and report on performance measures 
for care provided in Exchange plans, we will be able to give consumers 
robust information on the actually quality of care, patient experience, 
and total costs of care in each Exchange plan. This will greatly 
increase consumers' ability identify and enroll in plans that provide 
the best value for their health care dollars.
    To make the most of this opportunity, there are important 
principles Exchanges should follow to help consumers make the most of 
transparent cost and quality information. Exchanges need to:

   Apply lessons from the science of behavioral economics and 
        ``choice architecture'' to help guide consumers to plans 
        offering the best value.

   Present information to consumers as simply as possible. 
        Studies and experience shows that too much information can bog 
        down the enrollment process or prevent someone from choosing a 
        plan.

   Build from existing measures and collection systems to 
        ensure straightforward, efficient implementation.

   Limit collection to data that has a clear use; there is 
        considerable cost for reporting unused data.

   Add more information, new measures and quality improvement 
        and assurance strategies over time. Give stakeholders the 
        opportunity to comment on direction, and give plans and states 
        the opportunity to implement system changes.

                                  
