    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                     UNLAWFUL REINSURANCE PAYMENTS: CMS
        DIVERTING $3.5 BILLION FROM TAXPAYERS TO PAY INSURANCE COMPANIES

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

                                    HEARING

                                   BEFORE THE

                  SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 APRIL 15, 2016

                                   __________

                               Serial No. 114-135

     [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                                  __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    20-615 PDF                  WASHINGTON : 2017

    ----------------------------------------------------------------------------------------
    For sale by the Superintendent of Documents, U.S. Government Publishing Office,
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                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman

    JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
      Chairman Emeritus                    Ranking Member
    ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
    JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
    JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
    GREG WALDEN, Oregon                  GENE GREEN, Texas
    TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
    MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
    MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
      Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
    STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
    ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
    CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
    GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
    LEONARD LANCE, New Jersey            JERRY McNERNEY, California
    BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
    PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
    DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
    MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
    ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
    H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
    GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
    BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III,
    BILLY LONG, Missouri                 Massachusetts
    RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
    LARRY BUCSHON, Indiana
    BILL FLORES, Texas
    SUSAN W. BROOKS, Indiana
    MARKWAYNE MULLIN, Oklahoma
    RICHARD HUDSON, North Carolina
    CHRIS COLLINS, New York
    KEVIN CRAMER, North Dakota

                                     7_____

                  Subcommittee on Oversight and Investigations

                            TIM MURPHY, Pennsylvania
                                     Chairman
    DAVID B. McKINLEY, West Virginia     DIANA DeGETTE, Colorado
      Vice Chairman                        Ranking Member
    MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
    H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
    LARRY BUCSHON, Indiana               JOHN A. YARMUTH, Kentucky
    BILL FLORES, Texas                   YVETTE D. CLARKE, New York
    SUSAN W. BROOKS, Indiana             JOSEPH P. KENNEDY, III,
    MARKWAYNE MULLIN, Oklahoma               Massachusetts
    RICHARD HUDSON, North Carolina       GENE GREEN, Texas
    CHRIS COLLINS, New York              PETER WELCH, Vermont
    KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex
    JOE BARTON, Texas                        officio)
    FRED UPTON, Michigan (ex officio)

                                      (ii)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Tim Murphy, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................     1
        Prepared statement...........................................     3
    Hon. Diana DeGette, a Representative in Congress from the State
      of Colorado, opening statement.................................     5
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, opening statement....................................     6
        Prepared statement...........................................     7
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     7
        Prepared statement...........................................     9

                                    Witness

    Andy Slavitt, Acting Administrator, Centers for Medicare &
      Medicaid Services, Department of Health and Human Services.....    11
        Prepared statement...........................................    13
        Answers to submitted questions \1\...........................    54

                               Submitted Material

    Subcommittee memorandum..........................................    39
    Letter, undated, from Brent Nathan Brown of Mosinee, Wisconsin,
      to President Barack Obama, submitted by Ms. DeGette............    45
    Memorandum of February 23, 2016, from Congressional Research
      Service to House Committee on Ways and Means and House
      Committee on Energy and Commerce, submitted by Mr. Murphy......    46

    ----------
    \1\ Mr. Slavitt did not answer submitted questions for the record
      by the time of printing.

        UNLAWFUL REINSURANCE PAYMENTS: CMS DIVERTING $3.5 BILLION FROM
                      TAXPAYERS TO PAY INSURANCE COMPANIES

                                  ----------

                             FRIDAY, APRIL 15, 2016

                      House of Representatives,
          Subcommittee on Oversight and Investigations,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 9:35 a.m., in
    room 2123 Rayburn House Office Building, Hon. Tim Murphy
    (chairman of the subcommittee) presiding.
        Members present: Representatives Murphy, McKinley, Burgess,
    Blackburn, Flores, Brooks, Mullin, Hudson, Collins, Upton (ex
    officio), DeGette, Castor, Kennedy, Green, and Pallone (ex
    officio).
        Staff present: Gary Andres, Staff Director; Rebecca Card,
    Assistant Press Secretary; Jessica Donlon, Counsel, Oversight
    and Investigations; Emily Felder, Counsel, Oversight and
    Investigations; Brittany Havens, Legislative Associate,
    Oversight and Investigations; Charles Ingebretson, Chief
    Counsel, Oversight and Investigations; Chris Santini, Policy
    Coordinator, Oversight and Investigations; Jeff Carroll,
    Democratic Staff Director; Ryan Gottschall, Democratic GAO
    Detailee; Tiffany Guarascio, Democratic Deputy Staff Director
    and Chief Health Advisor; Christopher Knauer, Democratic
    Oversight Staff Director; Una Lee, Democratic Chief Oversight
    Counsel; Elizabeth Letter, Democratic Professional Staff
    Member; Andrew Souvall, Democratic Director of Communications,
    Outreach, and Member Services; and Arielle Woronoff, Democratic
    Health Counsel.

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

        Mr. Murphy. Good morning. We are here today at the
    Oversights and Investigations hearing on unlawful reinsurance
    payments to examine the transitional reinsurance program
    established under the Patient Protection and Affordable Care
    Act.
        The administration has inexplicably changed its position on
    a major component of this program and specifically how
    reinsurance payments are allocated. Despite issuing two final
    rules that allocated a portion of the reinsurance payments to
    the U.S. Treasury, CMS changed its position to prioritize
    payments to insurers. Essentially, CMS ruled that the Treasury
    doesn't get any money until the insurers get paid.
        CMS' latest interpretation contradicts the plain language
    of the law. Repeatedly, this interpretation contradicts the
    plain language of the law. This is just the latest in a long
    line of examples of the administration breaking its own
    signature law in an attempt to prop it up.
        The reinsurance program was created to provide financial
    assistance to insurance companies who offered plans through
    Obamacare. The program incentivizes insurance companies to
    continue selling plans through healthcare.gov and State
    exchanges because it compensates them for enrolling high risk
    individuals. Final payments for this 3-year program will end in
    2017.
        For each enrollee, insurance companies contribute a set
    dollar amount to the program, and then the funds collected are
    distributed to insurers who enroll the highest risk
    individuals. Built into this program was a deficit reduction
    measure, a proportion of each individual contribution is
    allocated to the Treasury. The statute estimates that
    approximately $5 billion would be designated to the Treasury
    through this program with $20 billion going to insurers.
        On March 11th, 2014, CMS issued a rule that spelled out how
    to divide the fund between Treasury, insurance companies, and
    administrative costs. CMS wrote that Treasury would receive
    about 25 percent of the fund in 2015.
        But while insurers have received billions of dollars from
    the program, the Treasury has still received nothing. That is
    because CMS changed its mind ten days later after issuing its
    final March 11th, 2014 rule. Ten days later, CMS published a
    rule completely reversing its policy position. In the new rule,
    CMS prioritized payments to insurers over payments to the
    Treasury and in short Treasury gets nothing until insurers are
    paid in full. CMS finalized this rule in May of 2014.
        But why did CMS dramatically reverse its own policy to
    favor insurance companies? We look forward to getting a
    straight answer from CMS today. We do know there is a cozy
    relationship between insurance companies and this
    administration, and the administration has worked to
    incentivize insurers to stick with the exchanges. In fact, we
    know that insurers have even emailed top White House officials
    begging for more taxpayer money to lower premiums and keep
    insurers selling Affordable Care Act plans.
        I expect Mr. Slavitt will attempt to justify why CMS
    changed its interpretation of the law, and he may argue that
    the statute is ambiguous or silent about what to do if the fund
    doesn't collect the full amount. However, the statute clearly
    states in this statement here that the portion of the
    contribution intended for the Treasury shall be deposited into
    the general fund of the Treasury of the United States and may
    not be used for a reinsurance program. This means that each
    contribution includes a portion intended just for the Treasury
    and CMS cannot divert those funds to pay insurance companies
    instead.
        Now the nonpartisan Congressional Research Service agrees
    with us that the statute is not ambiguous and it is not silent
    on the issue. CRS analyzed the statute and CMS'
    interpretations. The CRS found that the statute, quote,
    unambiguously states that each issuer's contribution contain an
    amount that reflect its proportionate share of the U.S.
    Treasury contribution and that these amounts should be
    deposited in the general fund of the U.S. Treasury, unquote.
        Mr. Slavitt may also argue that neither the law nor CMS
    contemplated what to do if the reinsurance fund came up short
    of the target amounts. The law states, however, that a portion
    of what is collected must go to the Treasury. Moreover, CMS did
    contemplate what would happen if the fund did not collect
    enough money. In its final rule issued March 11th, 2014, CMS
    predicted there would be a variance between the statutory
    benchmark and actual amount received through the program.
        When asked about the legal basis for diverting these funds
    at a February 24th, 2016, hearing before our Subcommittee on
    Health, Secretary Burwell provided no legal justification. The
    Secretary emphasized that this program is temporary, implying
    the committee's concerns are unimportant because the program
    will be over in 2017.
        I disagree. I think this issue holds the utmost importance.
    CMS' actions exemplify a problem that goes beyond just this one
    Affordable Care Act program. When the executive branch decides
    to reprioritize the budget and divert money intended for the
    Treasury it is a concern for Congress. When CMS officials
    decide to ignore a clear mandate from Congress it is an affront
    to this legislative body.
        The administration cannot rewrite its own law to make it
    more convenient for special interests. This sets a dangerous
    precedent and is an affront to the separation of powers.
    Moreover, this program funnels money to insurers, now with
    money intended for the Treasury, in an attempt to prop up the
    Affordable Care Act.
        What will happen when this program runs out and there is no
    mechanism to underwrite high risk individuals who sign up on
    the exchanges? Will more insurers drop out? Will premiums raise
    even higher? The administration's actions appear to be trying
    to delay the inevitable, the collapse of the Affordable Care
    Act if it is not reformed.
        I thank Mr. Slavitt for being here today. I know he and I
    have talked many times, and I appreciate his candor with me,
    and I hope that he will pledge to return CMS' first, lawful
    interpretation of the reinsurance program and allocate funds to
    Treasury as required by law.
        [The prepared statement of Mr. Murphy follows:]

                     Prepared statement of Hon. Tim Murphy

        We are here today to examine the ``transitional reinsurance
    program'' established under the Patient Protection and
    Affordable Care Act. The administration has inexplicably
    changed its position on a major component of this program-
    specifically, how reinsurance payments are allocated.
        Despite issuing two final rules that allocated a portion of
    the reinsurance payments to the U.S. Treasury, CMS changed its
    position to prioritize payments to insurers. Essentially, CMS
    ruled that the Treasury doesn't get any money until the
    insurers get paid.
        CMS' latest interpretation contradicts the plain language
    of the law. This is just the latest in a long line of examples
    of the administration breaking its own signature law in an
    attempt to prop it up.
        The reinsurance program was created to provide financial
    assistance to insurance companies who offered plans through
    ObamaCare. The program incentivizes insurance companies to
    continue selling plans through healthcare.gov and State
    exchanges, because it compensates them for enrolling high risk
    individuals. Final payments for this 3-year program will end in
    2017.
        For each enrollee, insurance companies contribute a set
    dollar amount to the program, and then the funds collected are
    distributed to insurers who enroll the highest risk
    individuals. Built into this program was a deficit reduction
    measure-a proportion of each individual contribution is
    allocated to the Treasury. The statute estimates that
    approximately $5 billion would be designated to the Treasury
    through this program-with $20 billion going to insurers.
        On March 11, 2014, CMS issued a rule that spelled out how
    to divide the fund between Treasury, insurance companies and
    administrative costs. CMS wrote that Treasury would receive
    about 25% of the fund in 2015. But while insurers have received
    billions of dollars from the program, the Treasury has still
    received nothing.
        This is because CMS changed its mind 10 days later after
    issuing its final March 11, 2014 rule. 10 days later, CMS
    published a proposed rule, completely reversing its policy
    position. In the new rule, CMS prioritized payments to insurers
    over payments to the Treasury. In short, Treasury gets nothing
    until insurers are paid in full. CMS finalized this rule in May
    2014.
        Why did CMS dramatically reverse its own policy to favor
    insurance companies? We look forward to getting a straight
    answer from CMS today. We do know there is a cozy relationship
    between insurance companies and this administration. And the
    administration has worked to incentivize insurers to stick with
    the exchanges. In fact, we know that insurers have even emailed
    top White House officials begging for more taxpayer money to
    lower premiums and keep insurers selling Obamacare plans.
        I expect Mr. Slavitt will attempt to justify why CMS
    changed its interpretation of the law. He may argue that the
    statute is ambiguous or silent about what to do if the fund
    doesn't collect the full amount. However, the statute clearly
    states that the portion of the contribution intended for the
    Treasury ``shall be deposited into the general fund of the
    Treasury of the United States and may not be used for the
    [reinsurance] program.'' This means that each contribution
    includes a portion intended just for the Treasury--and CMS
    cannot divert those funds to pay insurance companies instead.
        The nonpartisan Congressional Research Service agrees with
    us--the statute is not ambiguous or silent on this issue. CRS
    analyzed the statute, and CMS' interpretations. CRS found that
    ``the statute unambiguously states that `each issuer's
    contribution' contain an amount that reflects `its
    proportionate share' of the U.S. Treasury contribution, and
    that these amounts should be deposited in the General Fund of
    the U.S. Treasury.'' Mr. Slavitt may also argue that neither
    the law nor CMS contemplated what to do if the reinsurance fund
    came up short of the target amounts. The law states, however,
    that a portion of what is collected must go to the Treasury.
        Moreover, CMS did contemplate what would happen if the fund
    did not collect enough money. In its final rule issued March
    11, 2014, CMS predicted there could be a variance between the
    statutory benchmark and the actual amount received through the
    program. When asked about the legal basis for diverting these
    funds at a February 24, 2016 hearing before our Subcommittee on
    Health, Secretary Burwell provided no legal justification. The
    Secretary emphasized that this program is temporary, implying
    the committee's concerns are unimportant because the program
    will be over in 2017.
        I disagree. I think this issue holds the utmost importance.
    CMS' actions exemplify a problem that goes beyond just this one
    ObamaCare program. When the executive branch decides to
    reprioritize the budget and divert money intended for the
    Treasury, it is a concern for Congress. When CMS officials
    decide to ignore a clear mandate from Congress, it is an
    affront to this legislative body. The administration cannot re-
    write its own law to make it more convenient for special
    interests. This sets a dangerous precedent and is an affront to
    the separation of powers.
        Moreover, this program funnels money to insurers-now with
    money intended for the Treasury--in an attempt to prop up
    ObamaCare. What will happen when this program runs out, and
    there is no mechanism to underwrite high risk individuals who
    sign up on the exchanges? Will more insurers drop out? Will
    premiums rise even higher? The administration's actions appear
    to be trying to delay the inevitable--the collapse of
    Obamacare.
        I thank Mr. Slavitt for being here today and hope that he
    will pledge to return to CMS' first, lawful interpretation of
    the reinsurance program -and allocate funds to Treasury as
    required by the law.

        Mr. Murphy. I now recognize the ranking member of the
    subcommittee, Ms. DeGette of Colorado, for 5 minutes.

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

        Ms. DeGette. Thanks, Mr. Chairman. Well, I guess nobody
    here is surprised we are having yet another Oversight hearing
    on the Affordable Care Act. This subcommittee has had 16
    oversight hearings on the act since it was passed, and also we
    have sent dozens of oversight letters to the Department of
    Health and Human Services, to CMS, and others, pertaining to
    the Affordable Care Act.
        I know for a fact the agencies have spent countless staff
    hours and taxpayer dollars preparing testimony for hearings
    responding to these letters and providing documents,
    information and briefings to satisfy the committee's oversight
    interests.
        Now I just want to ask one question. Has anything of value
    been achieved through these efforts? Have we actually changed
    or modified the Affordable Care Act to work better? No, we
    haven't. Now listen, I believe in Government oversight. In
    fact, I have urged the chairman of the full committee and you,
    Mr. Chairman, to have meaningful oversight hearings around the
    Affordable Care Act because I do believe there are some things
    that can be fixed.
        But, you know, good Government illuminates the shortcomings
    and causes of institutional failures and thereby it informs any
    substantive changes in public policy. Unfortunately, our
    oversight over the act over the last 6 years has served neither
    to enlighten the committee, improve the law nor help millions
    of Americans. And I just use, for example, of what we are doing
    here today is the hashtag that the majority is using on social
    media, hashtag Great Obamacare Heist, or some of the
    inflammatory statements in the press release that the majority
    sent out about today's hearing and why we are having it.
        Now you have heard over and over again for 6 years that the
    ACA is destroying the lives of Americans, and also you just
    heard that the administration has not followed the law. I mean,
    I think that there may be a matter of misinterpretation or
    different interpretation, but nobody can argue that 20 million
    new Americans have insurance because of the Affordable Care
    Act.
        In this press release I just referenced, my colleagues
    describe the reinsurance program which is the topic of today's
    hearing as a, quote, ``taxpayer-funded giveaway.'' Now this is
    a program, the reinsurance program, that the majority
    understood was necessary and in fact put in their own bill on
    Medicare Part D when they passed that in 2005.
        The reason we have the ACA reinsurance program is because
    it helped us transition from an individual market that relied
    on medical underwriting to one in which insurers can no longer
    discriminate against individuals for preexisting conditions and
    cannot decline to offer coverage to somebody because they are
    sick. This temporary transitional program achieves this goal by
    collecting contributions from insurance companies which are
    then in turn used to make payments to insurance companies in
    the individual market which will offset the largest claims for
    the sickest individuals. I would hardly call that a taxpayer
    funded giveaway.
        This self-same press release also described the
    administration's decision to prioritize reinsurance payments to
    insurers as, quote, unlawful. You just heard that in the
    chairman's statement. Now this rhetoric is also unfair and
    inaccurate, because what we have here is a difference of
    opinion regarding a policy decision and a difference of views
    on how to interpret a provision of the ACA.
        So I look forward to hearing about those differences today,
    but unlawful again seems to be a little bit extreme.
        Now, I just want to put this in perspective, and I want to
    read an excerpt of a letter from Brent Brown to President
    Obama. Brent Brown is a lifelong Republican who recently
    introduced the President at a speech in Milwaukee, Wisconsin,
    and here is what he said.
        Quote, I did not vote for you either time. I have voted
    Republican for the entirety of my life. I proudly wore pins and
    planted banners displaying my Republican loyalty. I was very
    vocal in my opposition to you, particularly the ACA. Before I
    briefly explain my story, allow me to say this. I am so very
    sorry. I was so very wrong. You saved my life, Mr. President.
    You saved my life and I am eternally grateful. I have a
    preexisting condition and so could never purchase health
    insurance. Only after the ACA came into being could I be
    covered. Put simply to take not too much of your time if you
    are in fact taking the time to read this, I would not be alive
    without access to the care I received due to your law.
        Mr. Chairman, I would like unanimous consent to enter Mr.
    Brown's letter to the record.
        Mr. Murphy. Without objection.
        [The information appears at the conclusion of the hearing.]
        Ms. DeGette. And I think it is time to have a productive
    conversation about improving the ACA and the lives of all our
    constituents, and I yield back the balance of my time.
        Mr. Murphy. The gentlelady yields back. I now recognize the
    chairman of the full committee, Mr. Upton, for 5 minutes.

       OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MICHIGAN

        Mr. Upton. Thank you, Mr. Chairman. This hearing does
    continue the subcommittee's thoughtful and necessary oversight
    of the President's healthcare law. Today, the three-and-half-
    billion-dollar question is why CMS is now diverting taxpayer
    dollars to insurance companies without any legal authority to
    do so.
        Health law statute plainly states that a portion of the
    contributions to the reinsurance program must be given to the
    U.S. Treasury. Still, CMS has chosen to violate the law by
    prioritizing reinsurance contributions to health insurers
    rather than allocating the required portion to the U.S.
    Treasury.
        Initially, CMS followed the letter of the law and according
    to its final rule issued on March 11th, 2014, and similar to
    its rule the prior year, CMS planned to allocate contributions
    to the reinsurance program between the health insurers, the
    Treasury, and administrative costs. Less than two weeks later,
    however, on March 31st, 2014, CMS switched gears and issued a
    different proposed rule completely reversing their previous
    position.
        Rather than allocating a portion of the contribution to the
    Treasury as dictated by law, CMS instead prioritized
    reinsurance contributions to health insurers and finalized the
    rule two months later. So why, the question is why the sudden
    reversal to redirect billions away from the taxpayer?
        Legal memorandum released earlier this year by the
    nonpartisan CRS found that the statute does not permit CMS to
    prioritize reinsurance payments to insurers. In fact, the
    Congressional Research Service found that CMS' actions appear
    to contradict the plain language of the law.
        I would like to think that you have come to provide us some
    answers to those questions today as we look to understand the
    who, what, when, where, and why of that decision. The American
    public deserves answers and we look forward to that discussion.
    I yield back.
        [The prepared statement of Mr. Upton follows:]

                     Prepared statement of Hon. Fred Upton

        This hearing continues the subcommittee's thoughtful and
    necessary oversight of the President's healthcare law.
        Today, the 3.5-billion-dollar question is why CMS is now
    diverting taxpayer dollars to insurance companies without any
    legal authority to do so. The health law statute plainly states
    that a portion of the contributions to the reinsurance program
    must be given to the U.S. Treasury. Still, CMS has chosen to
    violate the law by prioritizing reinsurance contributions to
    health insurers rather than allocating the required portion to
    the U.S. Treasury.
        Initially, CMS followed the letter of the law. According to
    its final rule issued March 11, 2014, and similar to its rule
    the prior year, CMS planned to allocate contributions to the
    reinsurance program between the health insurers, the U.S.
    Treasury, and administrative costs. Less than two weeks later,
    however, on March 21, 2014, CMS switched gears and issued a
    different proposed rule completely reversing CMS' prior
    position. Rather than allocating a portion of the contributions
    to the Treasury as dictated by law, CMS instead prioritized
    reinsurance contributions to health insurers and finalized this
    rule two months later. Why the sudden reversal to redirect
    billions away from taxpayers?
        A legal memorandum released earlier this year by the
    nonpartisan Congressional Research Service found that the
    statute does not permit CMS to prioritize reinsurance payments
    to insurers. In fact, CRS found that CMS' actions appear to
    contradict the plain language of the law.
        We hope Centers for Medicare and Medicaid Services' Acting
    Administrator Andy Slavitt has come with answers today as we
    look to understand the `who, what, when, where, and why' of
    CMS' decision. The American public deserves answers.
        I would note that on this date 104 years ago, the Titanic
    sank after striking an iceberg. The President's health law is
    taking on water, and the administration is doing everything in
    its power, including violating the law, to keep it afloat.
        Regardless of one's view of the President's health law, the
    law and its implementation demand vigilant oversight. Congress
    cannot stand silent when its laws are not being faithfully
    executed.
        Further, as we continue to see today, billions of taxpayer
    dollars are at stake.

        Mr. Murphy. The gentleman yields back. I now recognize the
    ranking member of the full committee, Mr. Pallone, for 5
    minutes.

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

        Mr. Pallone. Thank you, Mr. Chairman. When we passed the
    Affordable Care Act into law more than 6 years ago, we
    dramatically changed the healthcare landscape in this country
    and the law has been a historic success. It has achieved its
    goals and made access to comprehensive health care a reality
    for the American people. Thanks to the Affordable Care Act, 20
    million more Americans now know the security of health
    insurance, and for the first time ever the uninsured rate has
    fallen below ten percent. And these are remarkable
    achievements.
        Before the Affordable Care Act was passed, the insurance
    system in this country was broken. Even my Republican
    colleagues who were obsessed with repealing the law acknowledge
    that this is the case.
        Absolutely no one is advocating for returning to the old
    system of rapidly rising costs, gross inefficiencies, and
    painful inequalities. It was a system where upwards of 129
    million Americans, nearly one in two people, could be
    discriminated against in the individual market for preexisting
    medical conditions ranging from diabetes to breast cancer to
    pregnancy. And these individuals could be charged more than a
    healthy person for the same coverage and were often denied
    coverage all together. Many insurance plans lacked important
    benefits and limited coverage.
        Fortunately, thanks to the Affordable Care Act, these
    things are no longer true. People who were previously deemed
    uninsurable because of preexisting conditions are finally
    getting health insurance coverage and this has meant a big
    change in how insurance companies do business.
        Under the old system, insurers sought to protect their
    bottom lines by avoiding the sickest and costliest patients in
    the individual market, a practice known as medical
    underwriting. Today, insurers must offer coverage to everyone
    and they cannot cancel someone's policy because he or she gets
    sick.
        The law's temporary reinsurance program operates to smooth
    this transition from a medically underwritten individual
    insurance market to one in which everyone is guaranteed
    coverage. Simply put, the reinsurance program spreads the cost
    of large insurance claims for very sick individuals across all
    insurers, helping to stabilize premiums during the early years
    of the new marketplace. The program collects contributions from
    health insurance companies, which are then used to make
    payments to the insurance companies in the individual market to
    offset the costs of their sickest enrollees.
        Now my Republican colleagues on this committee have called
    these payments, quote, handouts to insurance companies, and I
    quote, taxpayer funded giveaways. And neither of these things
    is true. The reinsurance program is a temporary program funded
    entirely by contributions from insurance companies to smooth
    the transition from a medically underwritten market to one
    where everyone is guaranteed coverage.
        Unfortunately, this type of overblown rhetoric and blatant
    misinformation is typical when it comes to my Republican
    colleagues and the Affordable Care Act. In fact, this same
    framework is a permanent fixture of our Part D program, a law
    that Republicans support, defend and promote. And I just find
    it ironic and hypocritical that this framework is acceptable
    for Medicare Part D, which was signed into law by a Republican
    President, but it is supposedly a taxpayer funded giveaway
    under a healthcare law from a Democratic President. You can't
    have it both ways.
        They have used similar rhetoric to describe the
    administration's decision to prioritize reinsurance payments to
    insurers over payments to the U.S. Treasury, the subject of
    today's hearing. For instance, a March 22, 2016 press release
    from the majority describes, and I quote, CMS' decision to loot
    billions from the Treasury to pay off insurance companies and
    calls on the agency, and I quote again, to stop unlawful
    payments to insurers. And these characterizations by the GOP
    are simply absurd.
        Let's be clear. What is at stake here is simply a policy
    disagreement about how to interpret statutory language in the
    Affordable Care Act. The administration has interpreted the law
    through a formal, transparent notice and comment rulemaking
    process. It determined that the statute is silent on what the
    agency should do in the event that collections are insufficient
    to fully fund both payments to insurance companies and payments
    to the U.S. Treasury. It then concluded that in the event of a
    shortfall, payments to insurers should be prioritized and that
    this prioritization furthers the statutory goals of the
    program.
        I know my Republican colleagues clearly disagree with this
    interpretation and they are entitled to their view. But the
    hyperbole and the misinformation is counterproductive and does
    nothing to help a single person get health insurance.
        So let me just conclude by expressing my disappointment in
    the direction this committee continues to take in conducting
    oversight of the Affordable Care Act. Hearings like this only
    serve to hurt Americans and reverse the progress that has been
    made for the millions who now benefit from the law. And I
    believe we should instead work to improve the law and ensure
    all of our constituents have access to the quality, affordable
    health care they deserve.
        I yield back, Mr. Chairman.
        [The prepared statement of Mr. Pallone follows:]

                 Prepared statement of Hon. Frank Pallone, Jr.

        When we passed the Affordable Care Act into law more than 6
    years ago, we dramatically changed the healthcare landscape in
    this country. The law has been a historic success. It has
    achieved its goals and made access to comprehensive healthcare
    a reality for the American people.
        Thanks to the Affordable Care Act, 20 million more
    Americans now know the security of health insurance, and for
    the first time ever, the uninsured rate has fallen below 10
    percent. These are remarkable achievements.
        Before the Affordable Care Act was passed, the insurance
    system in this country was broken. Even my Republican
    colleagues who are obsessed with repealing the law acknowledge
    that this is the case.
        Absolutely no one is advocating for returning to the old
    system of rapidly rising costs, gross inefficiencies, and
    painful inequalities. It was a system where upwards of 129
    million Americans--nearly one in two people--could be
    discriminated against in the individual market for pre-existing
    medical conditions, ranging from diabetes to breast cancer to
    pregnancy.
        These individuals could be charged more than a healthy
    person for the same coverage and were often denied coverage
    altogether. Many insurance plans lacked important benefits and
    limited coverage.
        Fortunately, thanks to the Affordable Care Act, these
    things are no longer true. People who were previously deemed
    uninsurable because of pre-existing conditions are finally
    getting health insurance coverage.
        This has meant a big change in how insurance companies do
    business. Under the old system, insurers sought to protect
    their bottom lines by avoiding the sickest and costliest
    patients in the individual market, a practice known as medical
    underwriting. Today, insurers must offer coverage to everyone,
    and they cannot cancel someone's policy just because he or she
    gets sick.
        The law's temporary reinsurance program operates to smooth
    this transition from a medically underwritten individual
    insurance market to one in which everyone is guaranteed
    coverage. Simply put, the reinsurance program spreads the cost
    of large insurance claims for very sick individuals across all
    insurers, helping to stabilize premiums during the early years
    of the new marketplace. The program collects contributions from
    health insurance companies, which are then used to make
    payments to insurance companies in the individual market to
    offset the costs of their sickest enrollees.
        My Republican colleagues on this committee have called
    these payments ``handouts to insurance companies'' and a
    ``taxpayer-funded giveaway.'' Neither of these things is true.
    The reinsurance program is a temporary program, funded entirely
    by contributions from insurance companies, to smooth the
    transition from a medically underwritten market to one where
    everyone is guaranteed coverage.
        Unfortunately, this type of overblown rhetoric and blatant
    misinformation is typical when it comes to my Republican
    colleagues and the Affordable Care Act. In fact, this same
    framework is a permanent fixture of our Part D program--a law
    that Republicans support, defend and promote. I find it ironic
    and hypocritical that this framework is acceptable for Medicare
    Part D, which was signed into law by a Republican President,
    but it is a supposed ``taxpayer-funded giveaway'' under a
    healthcare law from a Democratic President. You can't have it
    both ways.
        They have used similar rhetoric to describe the
    administration's decision to prioritize reinsurance payments to
    insurers over payments to the U.S. Treasury, the subject of
    today's hearing. For instance, a March 22, 2016 press release
    from the Majority describes ``CMS' decision to loot billions
    from the Treasury to pay off insurance companies,'' and calls
    on the agency to ``stop unlawful payments to insurers.'' These
    characterizations are absurd.
        Let me be clear: what is at stake here is simply a policy
    disagreement about how to interpret statutory language in the
    Affordable Care Act.
        The administration has interpreted the law through a
    formal, transparent, notice and comment rulemaking process. It
    determined that the statute is silent on what the agency should
    do in the event that collections are insufficient to fully fund
    both payments to insurance companies and payments to the U.S.
    Treasury. It then concluded that in the event of a shortfall,
    payments to insurers should be prioritized, and that this
    prioritization furthers the statutory goals of the program.
        My Republican colleagues clearly disagree with this
    interpretation. They are entitled to their view. But the
    hyperbole and the misinformation is counterproductive and does
    nothing to help a single person get health insurance.
        Let me conclude by expressing my disappointment in the
    direction this committee continues to take in conducting
    oversight of the Affordable Care Act. Hearings like this only
    serve to hurt Americans and reverse the progress that has been
    made for the millions who now benefit from the law.
        We should instead work to improve the law and ensure all of
    our constituents have access to the quality, affordable health
    care they deserve.

        Mr. Murphy. The gentleman yields back. Now let me introduce
    our one witness here. Andy Slavitt is the Acting Administrator
    for the Centers for Medicare and Medicaid Services. As Acting
    Administrator, he oversees programs that provide access to
    quality health care for 140 million Americans including
    Medicaid and Medicare, the Children's Health Insurance Program,
    and Health Insurance Marketplace. You have been before us in
    this committee, so welcome back.
        I ask unanimous consent also that the members' written
    opening statements be introduced in the record, and without
    objection, the documents will be entered into the record.
        You are aware that this committee is holding an
    investigative hearing, Mr. Slavitt, and when doing so has the
    practice of taking testimony under oath. Do you have any
    objections to testifying under oath?
        Mr. Slavitt. I do not.
        Mr. Murphy. And the Chair then would advise you that under
    the rules of the House, under rules of committee, you are
    entitled to be advised by counsel. Do you desire to be advised
    by counsel during your testimony today?
        Mr. Slavitt. No, thank you.
        Mr. Murphy. In that case, would you please rise, raise your
    hand, and I will swear you in.
        [Witness sworn.]
        Mr. Murphy. Thank you. You are now under oath and subject
    to the penalties set forth in Title 18, Section 1001, of the
    United States Code. You may now give a 5-minute summary of your
    witness statement.

     STATEMENT OF ANDY SLAVITT, ACTING ADMINISTRATOR, CENTERS FOR
      MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH & HUMAN
                                SERVICES

        Mr. Slavitt. Chairman Murphy, Ranking Member DeGette, and
    members of the subcommittee, I'm pleased to be here again and
    look forward to discussing the Affordable Care Act's
    transitional reinsurance program.
        The transitional reinsurance program is a critical building
    block in the new health insurance market from which so many
    consumers are benefiting. By now you've heard the statistics,
    an estimated 20 million Americans have gained coverage and the
    Nation's uninsured rate is at its lowest recorded level.
        When we talk about these numbers it's important to
    understand that it just doesn't happen by itself. Critical
    provisions of the ACA like reinsurance allow people with
    significant medical expenses to be covered affordably. Reducing
    the cost of health insurance is in everyone's interest, for
    individuals in small businesses who pay premiums, and because
    the Government gives Federal tax credits to people with modest
    incomes it is a much better deal for the Treasury. We all
    benefit. Covering people with significant medical expenses is a
    core policy objective of the ACA.
        I will refer to an example of the Hubbard family who live
    in Dallas, Texas. Sean Hubbard is studying for a PhD, and his
    wife Jamie works in a hair salon. They signed up for health
    insurance through the marketplace. Sean described what happened
    when his son Navin was born a month early. Other than being
    small he appeared to be healthy, but doctors discovered that
    Navin had a heart defect that would require surgery, and
    transferred him to Medical City Children's Hospital.
        In all, the bills have come to nearly $3 million, but we've
    been covered through it all. The little fellow has come home in
    mid-February, and though he's doing well he has more surgeries,
    speech and physical therapy and other procedures in his future,
    and it's comforting to know that because of the Affordable Care
    Act Navin can't be denied coverage in the future because of
    preexisting conditions.
        My point isn't simply to remind us what's happening
    throughout the country as millions of families get coverage for
    the first time, but also to point to the importance of the
    details that matter, critical policy provisions like
    reinsurance.
        We all know that the Hubbard situation could be visited on
    any of us. Sometimes we need expensive health care to get well.
    I spent more than two decades in the healthcare industry before
    joining the Government and I can tell you that until 2014,
    every day medical expenses like this haunted American families
    for the rest of their lives. The Affordable Care Act
    fundamentally changed that and changed the entire insurance
    market. Insurance companies can no longer deny or put limits on
    a consumer's coverage because they have a serious illness.
        This is precisely why reinsurance is so important. It
    spreads the risk across large populations. Every insurance
    company pays a smaller amount of money in the confidence that
    if they happen to enroll people like the Hubbards they'll
    receive money back to help cover the costs of the complex
    medical care. This is certainly not a concept unique to the
    Affordable Care Act, Congress also included the reinsurance
    program in Medicare Part D for similar reasons.
        Let me directly address the implementation of this
    provision and in particular how the allocation of funds were
    determined. In the case of reinsurance the statute didn't
    contemplate what should occur if collections either fell above
    or below the mark indicated in the statute. While I've been in
    Government only a short time, I can tell you that occasionally
    across all of our programs including Medicare and Medicaid we
    do encounter instances in which the statute is silent as to the
    necessary details to implement the policy.
        Given this, 2 years ago CMS proposed an approach of
    reimbursing high cost claims as a first priority and sought
    public comment on both the legal and policy reasoning of how to
    address the specific scenarios that weren't contemplated by the
    statute. CMS received universal public support for the policy
    of returning payments back to cover claims as a first priority,
    and no one, not one commenter questioned the legality or
    appropriateness of the approach.
        In the brief time that I've been with the agency, I can
    tell you that we take concerns that we receive very seriously.
    We understand that differences of interpretation sometimes
    happen, and as the committee has more recently expressed. Our
    lawyers carefully reviewed and assessed the recent memo from
    the Congressional Research Service to confirm our approach is
    supported by the statute.
        As the CBO recently noted, the entire cost of the Treasury
    of the ACA's coverage provisions is projected to be 25 percent
    lower than originally estimated. The reinsurance program is
    reducing costs. It continues to help many, many families like
    the Hubbards and serves taxpayers well by lowering Federal tax
    credit obligations.
        This year we will add approximately $500 million to the
    U.S. Treasury from the program as collections will exceed the
    targeted amount to reimburse high cost claims for 2015. We are
    committed to operating this program for American families and
    with focus on efficiency for taxpayers. I look forward to
    answering your questions now to the best of my abilities.
        [The prepared statement of Mr. Slavitt follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Murphy. Thank you, Mr. Slavitt. Before I start I want
    unanimous consent to include the CRS memo in the record, so
    without objection, I will include that there.
        [The information appears at the conclusion of the hearing.]
        Mr. Murphy. I recognize myself for 5 minutes. On March
    11th, 2014, CMS did issue a final rule that it allocated a
    proportion of reinsurance contributions to Treasury in
    accordance with the law, and just ten days later CMS issued
    another rule reversing its position and prioritizing payments
    to insurers over the Treasury. Why did CMS change its mind?
        Mr. Slavitt. Thank you, Mr. Chairman. Well, this was before
    my time at CMS so I couldn't give you other than what I've seen
    in the regulation, which is first of all it's not uncommon for
    new regulations to supplant older regulations as people learn
    more, and I think it was laid out in the regulation that was
    proposed subsequently that they were concerned about the
    precision of the estimate and so they laid out the policy
    reasoning and legal reasoning subsequently as to why they felt
    like that was the right course.
        Mr. Murphy. In its prior rulemaking though CMS had already
    contemplated what would happen if the reinsurance fund did not
    collect enough money and CMS said the Treasury would still
    receive a portion of the funds, so this is out of CMS'
    interpretation at the time. So the rule did not change because
    CMS had to figure out what to do if the fund came up short,
    correct?
        Mr. Slavitt. I think the--I'm sorry. Can I ask you to
    repeat that question?
        Mr. Murphy. Sure. The rule did not change because CMS had
    to figure out what to do if the fund came up short. I mean, was
    that their motivation that it would come up short?
        Mr. Slavitt. I think they were--I think there was
    uncertainty as to how to handle situations if it did come up
    short, and so I believe they looked at the situation and
    determined that that was the best policy decision and sought
    public comment as to whether or not that indeed was the right
    policy decision, but also laid out the legal reasoning to get
    comment on whether or not that was appropriate.
        Mr. Murphy. But they had already contemplated that scenario
    that it might come up short and again then made this leap to
    change their interpretation, and this is what is so puzzling to
    us. One day they interpret it one way according to the law, and
    another day as you said some lawyers reviewed and changed their
    minds on that. I would think that we have responded in truth
    and the law instead of interpretations.
        But let's go back to this nonpartisan Congressional
    Research Service statute which does speak to directly to the
    issue. I mean, CMS wrote that the law unambiguously states, and
    let me read the whole quote here, because the statute
    unambiguously states that each issuer's contribution contain an
    amount that reflects its proportionate share of the U.S.
    Treasury contribution and that these amounts should be
    deposited in the general fund of the U.S. Treasury, a contrary
    agency interpretation would not be entitled to deference under
    Chevron. Now you have read the CMS memo, I am assuming?
        Mr. Slavitt. Yes, I have, but more importantly so have our
    lawyers.
        Mr. Murphy. Well, I don't give a darn what your lawyers say
    if they are wrong. I mean, what they are saying is, so this is
    a very unambiguous statement from CMS and Congress made a clear
    rule in this in the law. And just because some lawyer said,
    well, we don't agree with what the law says and we don't even
    agree with what CRS says, we are going to come up with our own
    interpretation, I don't see where the law grants any latitude
    to say, here is what the law says but this is open to the
    interpretation of any lawyer who wants to see otherwise.
        So help me with this. I don't understand where the
    authority comes from to make that change.
        Mr. Slavitt. Sure. Well, we believe we have the statutory
    authority. And I think what is at root here is that the statute
    is very clear on what happens in the circumstance where $12
    billion is collected and the statute is silent on what happens
    when different amounts are collected.
        And I think as again because I wasn't here we'll piece this
    back based on what I've learned is that that meant either
    interpretations, there could be multiple interpretations of
    what to do in those situations.
        Mr. Murphy. I think the wording unambiguously is pretty
    clear. I don't think that says there is multiple
    interpretations. Have you seen the movie, The Big Short?
        Mr. Slavitt. I have.
        Mr. Murphy. So you know in there the whole issue was while
    they are taking all these mortgages, AAA, AB rated, that the
    banks were basically reselling these and repackaging these to
    keep these bond packages strong, and other people were saying
    it cannot be sustained, the banks at some point can't keep
    doing this.
        This whole thing looks to me of the same ilk, and I worry
    here. Look, I like the story you told about people who have
    insurance. I agree with you. I am glad people have that kind of
    coverage now. What worries me is that when this whole thing
    ends in a few months and they are not going to have this kind
    of thing to prop it all up anymore, we are going to see some
    collapse here in the health insurance market like occurred
    there for the bond markets.
        I am out of time. I now give 5 minutes to Ms. DeGette.
        Ms. DeGette. Oh, OK. That was kind of an interesting
    question about a movie, about the big banks and everything. Mr.
    Slavitt, do you think--I haven't seen the movie, but I am going
    to--do you think that what is happening here with the
    reinsurance is the same thing that the big banks did in this
    movie depiction?
        Mr. Slavitt. No, Congresswoman.
        Ms. DeGette. And why not?
        Mr. Slavitt. Well, this is reinsurance payments, which is--
    and I've been in the healthcare industry for quite some time.
        Ms. DeGette. Right.
        Mr. Slavitt. The premiums are funded by the plans
    themselves in order to cover losses that they receive. So this
    is not in fact taxpayer funded, as you pointed out earlier, but
    it really is a very, very common technique to make sure that
    people with large claims can get covered, particularly in the
    early years of the market.
        Ms. DeGette. It just smooths out the system, right?
        Mr. Slavitt. Exactly, smooths it out.
        Ms. DeGette. And this is going to be phased out once the
    market is stabilized, right?
        Mr. Slavitt. Right, after 3 years. Yes.
        Ms. DeGette. Now you said you weren't at the, we know you
    weren't at CMS at the time this policy was designed; is that
    right?
        Mr. Slavitt. That's correct.
        Ms. DeGette. So when it was designed--but you say you have
    gone back and you have researched it----
        Mr. Slavitt. Yes.
        Ms. DeGette [continuing]. And figured out what happened; is
    that right?
        Mr. Slavitt. That's correct.
        Ms. DeGette. You also talked to your lawyers about it.
        Mr. Slavitt. That's correct.
        Ms. DeGette. OK. Now, so when in 2015 CMS proposed
    prioritizing reinsurance payments to health insurance issuers
    over payments to the U.S. Treasury in the event that
    collections fell short of the amount needed to make both
    payments in full, do you know how that proposal came about?
        Mr. Slavitt. I don't know exactly how it came about, but I
    know that because they were unsure given that the statute
    didn't contemplate what to do, the approach they took was to
    file a notice of proposed rulemaking with the Federal Register
    for everybody to see so they could see comments both on the
    approach at the policy as well as the legal reasoning for that.
        Ms. DeGette. And did they go through that process then?
        Mr. Slavitt. They did.
        Ms. DeGette. And did they get any comments that this was
    illegal?
        Mr. Slavitt. No, they did not.
        Ms. DeGette. Did they get any comments that it was a quote,
    taxpayer funded giveaway?
        Mr. Slavitt. No, they did not.
        Ms. DeGette. OK. Do you know if the agency consulted with
    its lawyers when it put the proposal together?
        Mr. Slavitt. Yes. I can tell you that the lawyers
    scrupulously review every regulation that the agency proposes.
        Ms. DeGette. And the lawyers felt I assume that it would be
    legal to do this kind of rulemaking; is that right?
        Mr. Slavitt. That's correct.
        Ms. DeGette. Now you told Mr. Murphy that you have
    subsequently talked to the lawyers about whether this was legal
    despite the language that Mr. Murphy cited to from the statute.
    What was the advice that they gave you about why they thought
    it was legal?
        Mr. Slavitt. Well, so first of all it's not uncommon for
    there to be differences of opinion and for there to be memos
    that come in that don't agree. I think our practice, and I
    followed up specifically with the lawyers, was to make sure
    that upon reading that letter they still had the same
    interpretation that they had before.
        Indeed, their comment was that they believed that the
    regulation's still very clearly supported by the statute and
    that there's statutory authority for it.
        Ms. DeGette. Even now?
        Mr. Slavitt. Even now. And I would say, you know, I think
    we have a very good track record of responding. So, for
    example, the GAO over the last year, 2015, we have had 47
    recommendations from the GAO and 43 times we've concurred with
    those recommendations. Four times we didn't concur. So
    sometimes, many times, we were in agreement. There are
    occasions when we seek comments that we don't think we agree
    with.
        Ms. DeGette. And is this one of those four times?
         Mr. Slavitt. This is one of those times.
        Ms. DeGette. OK. So do you still think that this is an
    appropriate rule?
        Mr. Slavitt. Yes. This is a highly successful program. It's
    benefiting many, many Americans and the taxpayers.
        Ms. DeGette. And do you think that when it phases out that
    the bottom is going to fall out of the insurance industry?
        Mr. Slavitt. I don't think so.
        Ms. DeGette. Why not?
        Mr. Slavitt. Because I think the market now has a better
    feel for the people that are being insured. And I think that
    wasn't the case 3 years ago, and it was a little more so last
    year and a little more so this year, but I think by the time we
    get to the third year people have a pretty good understanding
    of the illnesses that----
        Ms. DeGette. And they will be able to smooth out the----
        Mr. Slavitt. I believe so.
        Ms. DeGette [continuing]. Discrepancies. OK, thank you. I
    yield back.
        Mr. Murphy. The gentlewoman yields back. I now recognize
    the vice chairman of the committee, Mr. McKinley, for 5
    minutes.
        Mr. McKinley. Thank you, Mr. Chairman. And I would like to
    follow up a little bit on the comments that were made when
    Chairman Murphy raised about the change of opinions and
    decisions that have been made under this administration.
        Administrator, thank you for coming back. It is good to see
    you again. But small rural hospitals all across this country
    are in dire shape. We know that nearly 60 hospitals have closed
    over the last 5 years in these rural hospitals. In my State,
    over half the critical access hospitals are operating rural
    health clinics and they are being adversely impacted by CMS'
    decision to disallow the cost of operating these rural health
    clinics.
        Now this is in contrary to a previous decision that
    approved it back in 2004, said that very specifically that you
    could include the cost. Now it has been a reversal. CMS
    apparently intends to enforce this new decision retroactively
    over 5 years, and the cumulative impact of this on rural health
    clinics and critical access hospitals in West Virginia is going
    to force a back payment of millions of dollars when they can
    barely afford to keep their doors open as they speak.
        Now these hospitals as you well know are treating our poor
    and our most vulnerable citizens in rural communities. Just
    last week, West Virginia's Health and Human Resources wrote you
    all, CMS, a letter. Are you aware of that letter?
        Mr. Slavitt. Yes. I'm not familiar with it in detail.
        Mr. McKinley. I am sorry?
        Mr. Slavitt. I'm not familiar with it in detail.
        Mr. McKinley. OK. I am just simply asking you at this point
    since at stake is whether rural hospitals they simply can't
    afford to make this retroactive payment, they simply can't do
    it and it is almost a sixth of all the hospitals or 12 of the
    hospitals, and so nearly 20 percent of all the hospitals in
    West Virginia are threatened----
        Mr. Slavitt. Right.
        Mr. McKinley [continuing]. Whether or not they can make
    this payment or not. So I am asking, please, they have reached
    up this far up. They have been trying, and I know you all have
    dug your heels in and I understand that. But this is a time
    not, to maybe rethink that please, and see if there isn't some
    kind of solution if we could work through this. Because they
    were based on a previous decision and you have made another
    decision, your department's made another decision that is
    contrary to that.
        We are just trying to prevent a retroactive payment. If it
    has to go forward I think they can make the adjustment, but
    going backwards I have got to appeal to your sensitivity. Will
    you take a look at that? Will you try to take a good look at
    that letter?
        Mr. Slavitt. Yes, we will. And I know we've been working
    with your staff on this issue, we'll continue to, and health
    care in rural America is a foremost issue for us. We have
    recently appointed a rural health task force and we will ask
    this task force to look specifically into this for you.
        Mr. McKinley. If you would, please. And would you also
    agree to work with the State of West Virginia to provide some
    technical assistance in drafting a Medicaid State plan
    amendment that would recognize the important role that these
    critical access hospitals serve in providing rural healthcare
    services and consequently clarify their eligibility for
    continued Medicaid DSH payments? Would you do that, please?
        Mr. Slavitt. Yes. Yes.
        Mr. McKinley. Just in closing, the last three questions.
    Does CMS provide any grants or other forms of financial
    assistance to rural hospitals so they can better cope and
    address these situations that are occurring? Again with the
    backdrop, all across America these small hospitals are closing.
        Mr. Slavitt. Right, yes.
        Mr. McKinley. We can't afford to have that as you well
    know, but do you have anything like that of funding sources?
        Mr. Slavitt. We have a number of initiatives that apply in
    many specific situations that support the economics and the
    long term economics in rural health. We have to look and see
    what's appropriate in the case of West Virginia, but there are
    a number of programs that I think are across the department.
        Mr. McKinley. I am going to say you are agreeing, and can
    you work with our office and also the State hospital
    association to ensure they have the resource, if that is what I
    am hearing you say that you may have some sources that they may
    not be aware of?
        Mr. Slavitt. Yes, we will absolutely do that.
        Mr. McKinley. Thank you. Most importantly, just please,
    don't make it retroactive. They can't do it. Thank you. I yield
    back my time.
        Mr. Slavitt. Thank you.
        Mr. Murphy. Thank you. I now recognize Ms. Castor of
    Florida for 5 minutes.
        Ms. Castor. Thank you, Mr. Chairman. Good morning, Mr.
    Slavitt.
        Mr. Slavitt. Good morning.
        Ms. Castor. Despite countless attempts by my Republican
    colleagues in Congress to repeal, undermine, defund the
    Affordable Care Act, the law is making affordable health
    insurance a reality for so many American families and
    especially in my State of Florida. Since passage of the ACA 5
    years ago, an estimated 20 million Americans have gained
    coverage through the ACA's various coverage provisions.
        And I would like to think of the Affordable Care Act in a
    couple of different categories. You have the improvements to
    Medicare, the fact that so many of our older neighbors are
    paying much less for their prescription drugs, billions of
    dollars back into the pockets of our older neighbors. And then
    lengthening the life of the Medicare trust fund is vitally
    important, all of the preventive care that our older neighbors
    on Medicare receive.
        And I think about the consumer protections, ending
    discrimination against people who had cancer, diabetes that
    health insurance companies can no longer discriminate and keep
    them out, they have gained coverage. And now after a few years
    we can finally take a true measure on coverage for so many of
    our neighbors.
        According to a recent Gallup poll, the uninsured rate has
    dropped to a historic low. As of the first quarter of 2016, the
    rate has dropped 6.1 percentage points since the mandate
    provision of the ACA took effect in 2014. And our African
    American and Hispanic neighbors have experienced the greatest
    decrease in uninsured rates by approximately ten percent. So
    now we are at this overall historic low in America for the
    uninsured rate.
        And let me tell you the story of the State of Florida, my
    home State, where we had one of the highest rates of uninsured
    in the country. In Florida, 1.7 million Floridians selected or
    were automatically re-enrolled in quality, affordable health
    coverage through the marketplace. That is ten percent of the
    entire country, because nationwide nearly 11.7 million
    consumers selected a plan or automatically re-enrolled.
        The tax credits have really helped. Seventy two percent of
    Florida marketplace enrollees obtained coverage for $100 or
    less after the tax credits in 2015. And in Florida, consumers,
    we are fortunate to have a competitive market. We have
    consumers could choose from 14 issuers in the marketplace last
    year. That was up from 11 in 2014.
        Florida consumers could choose from an average of 42 health
    plans in their county for 2015 coverage. This was the goal, to
    have a competitive marketplace so Americans can do what they do
    best, go shopping and compare. And having the navigators kind
    of help them through a lot of these decisions has been a
    godsend.
        And then there was the question would young adults, we need
    healthy folks to enroll and that plays right into this
    transitional reinsurance. And the good news is that in Florida
    over a half million consumers under the age of 35 signed up for
    marketplace coverage, and about half a million consumers 18 to
    34, which was 28 percent of all plan selections, were signed
    up.
        So this continuing to harp on this has been a disaster. It
    is just not true and now the facts bear it out. But I was
    wondering if you could put this historic low of the uninsured
    rate into perspective. What does this mean for our country to
    have such a low uninsured rate?
        Mr. Slavitt. Well, thank you, Congresswoman. Having been in
    health care my entire career and never seeing the uninsured
    rate decline, it certainly has been rewarding to see that
    happen and to feel it. At least in my job you can see it in the
    actual people as you can in your constituents.
        Florida, I believe, as you said, has a lot to be proud of.
    The uninsured rate, I believe, has declined by a third in
    Florida, and if the State chooses to expand Medicaid at some
    point, that will----
        Ms. Castor. It will be even lower.
        Mr. Slavitt [continuing]. Be even greater. So I think
    there's a lot of good things that have happened and good things
    to come.
        Ms. Castor. Well, thank you to you and your team for
    everything that you have done to help make health insurance
    more affordable for so many of our neighbors across America.
        Mr. Slavitt. Thank you.
        Ms. Castor. Thank you.
        Mr. Murphy. The gentlewoman yields back, and now Dr.
    Burgess is recognized for 5 minutes.
        Mr. Burgess. Thank you, Mr. Chairman. Thank you,
    Administrator Slavitt, for joining us here in our committee
    again. I think it is important that we continue to have these
    types of discussions.
        Certainly in the very early days of President Obama's
    administration the statement was made repeatedly that
    transparency would abound in this healthcare law. In many ways
    it was meant as a criticism to Republicans that boy, if your
    member is not on board with this everybody will know it; if
    your member is standing with the insurance companies and not
    with the administration everybody is going to know it because
    it is all going to be transparent. It is all going to be on C-
    SPAN, and then we found that it wasn't.
        And in fact, even going back to 2009 when Henry Waxman was
    chairman of this committee, I submitted a resolution of inquiry
    asking for who was involved in crafting the things that
    eventually became known as the Affordable Care Act. And to my
    surprise, Mr. Waxman agreed about halfway with me and agreed
    that I should have seven of the 11 things that I asked for. I
    never got them, but it was a minor moral victory for me that I
    got Mr. Waxman's concurrence during that. And as we have gone
    on through this, time after time we bump up against things
    where it just doesn't seem like it all adds up.
        So at this point can you tell me which person, official,
    office within CMS is responsible for interacting with HHS
    leadership with the White House on these reinsurance payments?
    Is there a single individual or office?
        Mr. Slavitt. Thank you for the question. I think the best
    way for me to answer that question--given that I wasn't here, I
    couldn't name any specific individuals--is everybody. This was
    a public, transparent rule put out that had to be reviewed and
    cleared across the Government and so everybody had the
    concurrence and the review, and then as it went into the
    Federal Register that was also true for the general public and
    everybody else.
        Mr. Burgess. Yes.
        Mr. Slavitt. So there was no attempt for someone to do
    something without a broad review within the department and then
    even broader review with the public.
        Mr. Burgess. You know the old saying, too many people in
    charge; no one in charge. Someone has to be in charge, so who
    would have been the person who picked up the phone and called
    the White House when it was seen that there were problems
    meeting your obligations?
        Mr. Slavitt. This is before my time so I don't know the
    answer to that question.
        Mr. Burgess. Could you research that for us and get us that
    information from 2014 who that person would have been?
        Mr. Slavitt. I certainly could try.
        Mr. Burgess. So outside of the formal rulemaking process
    did anyone outside the executive branch communicate with Health
    and Human Service leadership or CMS about prioritizing
    reinsurance payments or the resinsurance program generally?
         Mr. Slavitt. Not to my knowledge. But again I wasn't here,
    but not to my knowledge.
        Mr. Burgess. Multiple reports in the press during the years
    2012, 2013, 2015 about episodes where all of the insurance
    executives were going down to the White House and meeting with
    the President and his team and Secretary Sebelius. Would there
    be any way the committee could know if these reinsurance
    payments were part of those discussions that occurred at the
    White House?
        Mr. Slavitt. Not to my knowledge.
        Mr. Burgess. Would there be any internal office memoranda
    that would have been generated by these meetings? Would the
    Secretary's office have responded to the White House with any
    emails? We need to see those types of communications.
        Mr. Slavitt. Yes, not that I have seen.
        Mr. Burgess. Well, again, we have asked for the production
    of some documents but what has been produced has not been
    particularly helpful. Are there additional documents that you
    are working on to provide to the committee?
        Mr. Slavitt. Yes. I know we've provided a number of
    documents and I know that we're working on more.
        Mr. Burgess. When could the committee expect to receive
    those documents?
        Mr. Slavitt. I think quite soon. We're just, I can't give
    you a date until I check with my team, but we can get back to
    your staff and make sure we get this to you as quickly as we
    can. I know they're working on it.
        Mr. Burgess. To me quite soon is April 18th because that is
    when our income taxes are due. Could it be that soon?
        Mr. Slavitt. I can't commit to Monday, no.
        Mr. Burgess. You know it has been a repetitive problem in
    this subcommittee, and it is not just with HHS, as with
    Department of Energy during Solyndra where it just seems like
    there was a decision made internally to change the rules on
    behalf of the administration. And it is troubling, this
    committee continues to be troubled by that and unfortunately
    today's hearing is just additional evidence that we are not
    there yet as far as the transparency part.
        Thank you, Mr. Chairman, I will yield back.
        Mr. Murphy. Mr. Hudson, you are recognized for 5 minutes.
        Mr. Hudson. Thank you, Mr. Chairman. And thank you, sir,
    for being here today. I heard you answer an earlier question
    about that once the transitional reinsurance program ends in
    2017, the question of given that United Health pulled out were
    you concerned about other companies pulling out of the program,
    and you indicated that you didn't think there was much concern
    of that.
        But I am just curious as you are looking at that who are
    you discussing this with? Are you talking to folks in the
    marketplace? How are you basing your decision that you think
    the market is stabilized?
        Mr. Slavitt. So I'll start with some data. In 2016, the
    average individual had, nine out of ten individuals had three
    or more health plans to choose from. So what we call a full
    shelf is present in 90 percent of the country. Now obviously
    people are just beginning the rate filings process for 2017,
    and so we're going to see and we'll certainly have to let that
    speak for itself as people make their decisions.
        I anticipate there will be additions and subtractions, and
    in formal conversations that I've had with people throughout
    the industry including State departments of insurance who of
    course are monitoring these things very closely and what I hear
    from companies themselves is indeed that. There may be some
    people to pull out of certain markets and there will be people
    that enter additional markets but that I don't see the overall
    equation changing.
        Mr. Hudson. OK. So it is not your anticipation then that
    you are going to see a whole lot more companies withdrawing
    from these exchanges once this reinsurance, I mean, supplement
    is there? I mean, it is obviously creating a large liability
    for these companies and we are already seeing some pull out
    while they have still got the subsidy in place.
        Mr. Slavitt. Yes. Our job is to make sure that people can
    see it coming so they can price for it. But what people expect
    of Government and what I expected when I was in the private
    sector was some predictability and some visibility. So as long
    as they know in advance, as they've long known that this is a
    3-year temporary program, then as they submit bids for the
    coming year they can submit them knowing what they now know
    about the population which they didn't know earlier and about
    the fact that there will no longer be a reinsurance program.
        Mr. Hudson. Right. Well, has CMS discussed methods to
    convince some of these insurers to stay in the exchanges in the
    event that you see a dropout following the termination of this
    transition period?
        Mr. Slavitt. You know, most of the conversations that
    occur, occur locally within a State between the State
    department of insurance and the rate submission process. That
    is generally handled there locally. We do whatever we can to
    support and make sure that we are balancing out the marketplace
    so that it can be a functional marketplace with stability and
    with predictability.
        So we tend to, I would say we tend to focus on the big
    policy decisions that will make the market healthy for the long
    term, not so much on the micro decisions that will affect an
    individual plan here and there.
        Mr. Hudson. Well, when you start with these policy options
    what are you talking about exactly?
        Mr. Slavitt. So to give you an example, we focused recently
    on the rules for special enrollment periods and what should be
    required of an individual to demonstrate that they're eligible
    for insurance during a special enrollment period, in other
    words outside of the open enrollment period.
        Getting that right is important because if the rules are
    too lenient then you end up with people who may just apply for
    insurance when they get sick which disrupts the market, and if
    they're too tight it will keep people, citizens who deserve
    coverage and need coverage, away from having the coverage.
        So those are the kinds of policy decisions that we recently
    have been making decisions around, and I think it's our job to
    watch the marketplace because it's still early, see what's
    working and what's not working and make adjustments. And I
    expect good Government will be continued with small adjustments
    along the way.
        Mr. Hudson. OK. But other than just going through the State
    exchanges, you haven't had any discussions or any discussions
    about specific things you could do with companies thinking
    about pulling out of the exchange without this transitional
    subsidy, that there is no really plans or discussion of any
    other ways to try and convince them to stay?
        Mr. Slavitt. Yes. I wouldn't characterize that our job is
    to convince them to stay nor would I tell you that we've heard
    concerns about the transitional policy going away. I think
    people because they've long understood that it was a 3-year
    plan that hasn't been a major topic of discussion at least to
    my knowledge.
        Mr. Hudson. OK, thank you. Mr. Chairman, as my time is
    expiring I will yield back.
        Mr. Murphy. Thank you. I know we have votes coming up in a
    few minutes so we will move quickly. Mr. Green is recognized
    for 5 minutes.
        Mr. Green. Thank you, Mr. Chairman. Administrator Slavitt,
    thank you for being here today, and I want to thank you for
    making the Affordable Care Act and health reform work.
        It first rolled out in our district in a very urban area of
    Houston. Before the Affordable Care Act we were one of the
    highest in the country of people who worked but didn't get
    insurance through their employer. When it first rolled out we
    identified 20,000 people who were able to get health insurance
    and each renewable time we have increased that.
        My frustration is that just recently we identified 50,000
    of my constituents in urban Houston would be able to get health
    care if the State would have expanded Medicaid, 50,000 just in
    our district, and that is with a hundred percent Federal
    reimbursement to State. Not a penny of State dollars for 3
    years would have to go to that, so it is just frustrating.
        My colleagues have been throwing around the 3.5 billion
    figure. It is even part of today's title, but I think it is
    important to talk about that number in context. Last month, the
    Congressional Budget Office came out with a new Affordable Care
    Act estimate stating that, quote, compared with the projection
    made by CBO and JCT, the Joint Committee on Taxation, in March
    of 2010 just before the ACA was enacted, the current estimate
    of the net cost of insurance coverage over the 2016 to '19
    period is lower by $157 billion, lowered by 25 percent. And I
    repeat: $157 billion under budget. That is not something we see
    here in the halls of Congress very often. That is 157 billion
    left in the Treasury.
        And I know that the insurance market and these estimates
    are complex, and we have been talking about how important
    reinsurance has been in creating stability in the market while
    new consumer protections are created. My first question, is it
    fair to say that reinsurance has played at least a role in the
    success covering so many people while coming in substantially
    under budget?
        Mr. Slavitt. Yes, Congressman.
        Mr. Green. We know that consumers win when the health
    insurance premiums are low, but how does that impact the U.S.
    Treasury?
        Mr. Slavitt. Well, because the insurance premiums for
    modest income Americans are subsidized in effect with tax
    credits, everything we do to improve affordability for
    consumers directly reduces the obligation of the Federal
    Government. And so this $157 billion under budget is, I think,
    in part a result as you point out of good stewardship and
    effective execution of some of these programs like reinsurance.
        Mr. Green. So does that suggest at the end of the day the
    decision to prioritize reinsurance payments and make sure this
    program works effectively as intended by the statute has been a
    good deal for the taxpayers?
        Mr. Slavitt. It has.
        Mr. Green. I want to thank you for that. There are many
    recent examples of counterproductive action by Congress to
    thwart the overall goals of health reform. Successful attempt
    by Republicans to limit payments to insurers under the risk
    corridor program resulted in payouts of only 12 cents on the
    dollar that insurers originally expected to receive. That was
    hailed as a victory by my Republican friends, but it only
    served to undermine and destabilize the health insurance market
    while mainly harming smaller insurance.
        Administrator Slavitt, if Congress takes the legislative
    action to limit reinsurance payments what would be the effect
    on premiums for consumers?
        Mr. Slavitt. Anything that hurts the affordability of
    health care is in my view something that we really ought to be
    very, very careful about because it's counterproductive. And I
    think it's all of our jobs to figure out how to continue to
    reduce the cost of health care for American citizens and for
    the entirety of the program, and reinsurance has been a vital
    tool to do that.
        Mr. Green. So this would be detrimental and disruptive to
    the individual market?
        Mr. Slavitt. Yes.
        Mr. Green. If premiums did increase it seems likely that
    that would be the consequences for the Treasury.
        Mr. Slavitt. That would come in many cases, particularly
    subsidized care, subsidized tax credits, it would come directly
    out of the U.S. Treasury if premiums were to increase as a
    result of that.
        Mr. Green. Well, I hope today's hearing is not simply
    another attempt to find new ways to obstruct and undermine the
    Affordable Care Act through the legislative process. Congress
    should be pursuing action to improve the functioning of the ACA
    and help individuals get covered, not engaging in efforts to
    destroy it.
        I have said this many times at this committee, no law we
    have ever passed in Congress is perfect, but for the last 6
    years all we have seen is repeal after repeal instead of
    sitting down working across the aisle to make sure it is best
    for the taxpayer and it is also best for the people who need
    that insurance. And I yield back my time.
        Mr. Murphy. Thank you. We are going to recognize Ms.
    Blackburn if we can get that done. And I want to say there are
    two other members who want to come back and ask, and then also
    Mr.----
        Mrs. Blackburn. Yes, thank you.
        Mr. Murphy [continuing]. But Ms. Blackburn will be
    recognized.
        Mrs. Blackburn. Thank you so much, Mr. Chairman. Mr.
    Slavitt, I have got a couple of quick questions. I want to
    follow up on something that Dr. Burgess was saying and
    something the chairman had mentioned to you in the beginning.
    You say that you feel like that the rule gives you the
    authority, or the law gives you the authority to change the
    rule.
        Mr. Slavitt. Yes, we believe we have the statutory
    authority.
        Mrs. Blackburn. OK. Can you point out to me explicitly
    where it says that? Is there any way that you can read this and
    then tell me that we are not explicit in what this says and
    where you could have put rules in place and then go back and
    you change your mind and you decide to rework this? So can you
    point to me, can you submit to us the memo that says this is
    where we think we misread the law the first time and then we
    changed our mind?
        Mr. Slavitt. Sure. Thank you for the question.
        Mrs. Blackburn. Do you know that memo exists?
        Mr. Slavitt. The entire legal reasoning was made public in
    the regulations, so we can make sure to get you a copy of that.
        Mrs. Blackburn. OK. Well, that would be helpful, because I
    was a little bit confused when you said you didn't know what
    the process was or what the decisions were because you were not
    there. But then you turned around and you said that it was a
    public and transparent process. And in answering Ms. DeGette
    you said that there was advice given and you knew that there
    were memos to that effect.
        So I think what we would like to see from you, since the
    law is pretty explicit I think we would like to see from you
    explicitly which memo and know what person decided that this
    was going to be a good idea. So will you submit that for us and
    can we have it within the next week?
        Mr. Slavitt. Yes. We will submit the legal reasoning to
    you, absolutely.
        Mrs. Blackburn. OK. That will be good if you can give us
    that entire paper trail. In answering another question you said
    that you thought it was important for the insurers--I just want
    to be sure I understood this right--for the insurers to see the
    money coming so they can price for it.
        Mr. Slavitt. I believe what I had said or intended to say,
    can't remember exactly what I said, is that we give enough
    visibility and clarity as to the rules and enough time that the
    insurance companies know what's coming and know what to expect.
    And that way if we are aiming to lower premiums for Americans,
    which of course we all are, that that can be effective.
        Mrs. Blackburn. So you think that we have got to put
    additional taxpayer funds into this program in order for the
    premiums to come down because we don't have enough money that
    people are paying, or the insurance costs too much, or they
    have access to the queue not to the care so the hospitals still
    have a tremendous amount of uncompensated care; is that what I
    am to understand from you?
        Mr. Slavitt. No, Congresswoman, and I apologize if you
    misinterpreted me. No taxpayer funds have gone into this
    program. These are funds that come from the insurance
    companies, from the employers and from individuals to fund and
    smooth out large losses like the ones I talked about.
        Mrs. Blackburn. OK. So then they have to have that money in
    order to get the prices down, which means the consumer who is
    buying the product is going to pay more so the insurance
    company has access to the money to put back in the product; is
    that correct?
        Mr. Slavitt. Yes, I don't agree with that characterization,
    with respect.
        Mrs. Blackburn. OK.
        Mr. Slavitt. I think----
        Mrs. Blackburn. So the money just exists?
        Mr. Slavitt. No, I think----
        Mrs. Blackburn. So OK, let me move on. If we can
    manufacture money I guess we can manufacture a lot of things.
    In the reinsurance program what insurance company has gotten
    the most money?
        Mr. Slavitt. I don't know the answer to that, but I would--
    --
        Mrs. Blackburn. Would you find that out and get it to us?
        Mr. Slavitt. Sure. We'll look at that.
        Mrs. Blackburn. OK.
        Mr. Slavitt. Yes.
        Mrs. Blackburn. That sounds great. In the interest of time,
    I will yield back.
        Mr. Murphy. Thank you. I know we have a vote now, and there
    is, I think, three members, Mr. Flores, Mr. Mullin and Ms.
    Brooks want to come back. Can you stick around and we will just
    do this after votes real quick? We will go right to the
    questions and then wrap it up. I appreciate that. Thank you
    very much. We will be back after votes.
        [Recess.]
        Mr. Murphy. All right, we are reconvening this hearing from
    Oversight and Investigations on unlawful reinsurance payments,
    and now I am going to recognize the gentleman from Oklahoma,
    Mr. Mullin, for 5 minutes.
        Mr. Mullin. Thank you, Mr. Chairman. And thank you for
    being here today and thank you for hanging over as we had to
    run and vote. They don't seem to care about hearings. They just
    call votes whenever.
        Anyways, look, there is a couple of questions that I think
    is very important to us so we can get an understanding. One, if
    you could answer this the best you can. I understand that on
    March 21st, 2014, HHS issued a proposed rule for making
    payments that are required by law under the reinsurance
    program. It is my understanding that this rule accurately
    reflect what was required by statute, the payments being made
    in three areas, one to the Treasury, insurance companies and to
    cover administration costs; is that correct?
        Mr. Slavitt. I believe so.
        Mr. Mullin. You believe so?
        Mr. Slavitt. Yes.
        Mr. Mullin. I mean that is what the law is, right?
        Mr. Slavitt. Yes.
        Mr. Mullin. Then ten days later HHS issued another proposed
    rule that completely changed what was proposed in the first
    rule. Now the payments would go to the insurance companies and
    the Treasury would only get payments until a certain threshold
    was made for the insurance companies; is that correct?
        Mr. Slavitt. It is, yes.
        Mr. Mullin. Can you explain why?
        Mr. Slavitt. So because the statute was silent on how to
    handle situations where either a lower amount or greater
    amount----
        Mr. Mullin. What do you mean silent? It specifically
    addressed the three issues. It doesn't speak, it is a statute.
    It is written.
        Mr. Slavitt. Yes, it is written to address the estimated
    collection of $12 billion. What it doesn't address is what
    happens if a lower amount is collected or a higher amount is
    collected, which is why the agency felt the need to put out a
    public regulation.
        Mr. Mullin. In the statute, it specifically says that it is
    to go to the Treasury, insurance company, and to cover
    administrating costs, not the insurance companies and then pay
    only after a certain threshold. That wasn't specified in it; is
    that correct?
        Mr. Slavitt. The rules specified how to handle----
        Mr. Mullin. No, no. The statute, not the rule. Not what you
    guys issued, the statute.
        Mr. Slavitt. I'm speaking of the statute, Congressman.
        Mr. Mullin. Yes. Well, you mentioned rule. Go ahead.
        Mr. Slavitt. Yes, so the statute speaks clearly to what
    happens if $12 billion is collected in the first year. What--
    again, this is before my time--but what the agency needed to do
    is to put forward, and they put forward for public comment 2
    years ago----
        Mr. Mullin. Has that public comment been made public yet?
        Mr. Slavitt. Yes.
        Mr. Mullin. The opinions have been made back, the response
    has been made back to the committee?
        Mr. Slavitt. Yes.
        Mr. Mullin. OK.
        Mr. Slavitt. Yes. It sought public comment on how to
    address situations like the one that arose where less than $12
    billion was collected.
        Mr. Mullin. Now what did the public comments suggest?
        Mr. Slavitt. Public comments suggested that the policy of
    first taking care of reimbursing the claims of the insurers was
    the proper policy and was legally supportive.
        Mr. Mullin. By whom, because that wasn't the intent of the
    original statute and that is I am asking the question. We
    obviously don't support it going back to the insurance
    companies. Intention was to help pay down the debt. And yet
    after a rule was issued, ten days later you reissued another
    rule stating basically what you guys felt needed to be done.
        Mr. Slavitt. And I understand that there is a difference of
    opinion because----
        Mr. Mullin. Well, it is not an opinion it is a statute,
    which is why when it is law and when we have a question about
    it and we want clarification on it and we ask a committee, or
    we ask HHS for a response to it, we would like clarification.
    What we never get is clarification.
        Mr. Slavitt. Well, we believe that there's a statutory
    authority. That legal reasoning was put forward publicly.
        Mr. Mullin. So if there was clarification that needed to be
    clarified why wouldn't you come back to the committee and seek
    clarification on it? I mean, because a statute is a statute of
    what it was, and so other than issuing a rule and then ten days
    later coming back and issuing another rule, why wouldn't you
    just simply come back here? We feel like what happened is that
    HHS decided to ignore what the statute was, what the intent of
    Congress was and decided to make your own decisions.
        Mr. Slavitt. I don't think that's the case. It was put
    forward----
        Mr. Mullin. Well, then how else do you explain it? Because
    you never came back here, and we were asking questions and
    clarifications and we weren't receiving those.
        Mr. Slavitt. This is 2 years ago. It was put forward for
    public comment for everyone including the committee to opine on
    the very public reasoning that was----
        Mr. Mullin. It is my understanding when the committee asked
    for clarification there was none issued.
        Mr. Slavitt. I'd have to go back and check on that but it's
    not my recollection. But I wasn't here, but that's not what I
    learned.
        Mr. Mullin. Well, we were still asking questions. We are
    here today trying to get the questions figured out.
        Mr. Slavitt. Yes. And we're doing our best to provide
    answers including the legal and the policy reasons and that's
    what I'm here today to answer.
        Mr. Mullin. All right, thank you. I yield back.
        Mr. Murphy. The gentleman yields back, and I now recognize
    the gentleman from Texas, Mr. Flores, for 5 minutes.
        Mr. Flores. Thank you, Chairman. And thank you, Mr.
    Slavitt, for joining us today. A couple of preambles I wanted
    to share with you, and I know you have heard a couple of these
    already, before we get into the questions.
        The CRS memo that we have talked about earlier today
    determined that the statute is not ambiguous and that CMS
    actions contradict the plain language of the law. And then in
    February of 2016, in front of the Health Subcommittee of this
    committee, Secretary Burwell was asked about the legal basis
    for diverting the funds and she provided no legal
    justification.
        So it seems to me like we are still struggling to find the
    legal justification under which the funds were diverted. I do
    have some fact based questions to start with. The first one is
    how much money have you collected for the reinsurance program
    in 2014 from all the States?
        Mr. Slavitt. I'll get back to you on the precise number. We
    have it here somewhere.
        Mr. Flores. I mean, I would assume you have got that number
    in preparation for this committee meeting since that is what we
    are talking about.
        Mr. Slavitt. It's $9.7 billion.
        Mr. Flores. 9.7?
        Mr. Slavitt. Yes.
        Mr. Flores. OK. And for the Treasury you collected zero, I
    am assuming?
        Mr. Slavitt. For 2014 that's correct.
        Mr. Flores. OK. And how much did you pay the insurance
    companies that year for calendar 2014?
        Mr. Slavitt. I think it was 8 billion.
        Mr. Flores. 8 billion. And the $1.7 billion difference,
    where did that go?
        Mr. Slavitt. That's still in a pool to be used against
    claims that come through the reinsurance pool.
        Mr. Flores. Moving to 2015, how much did you collect for
    reinsurance?
        Mr. Slavitt. 6.5 billion.
        Mr. Flores. 6.5. The law says that it was supposed to be 6,
    and then to the Treasury you were supposed to collect too. I am
    assuming that was zero?
        Mr. Slavitt. No, that'll be $500 million to the Treasury.
        Mr. Flores. You did give 500 million to the Treasury, oK.
        Mr. Slavitt. We will. We will, yes.
        Mr. Flores. You will or you did?
        Mr. Slavitt. We will, yes.
        Mr. Flores. OK. And then what were the aggregate insurance
    company payments for that fiscal year, for that calendar year?
        Mr. Slavitt. Payments in--yes, they have not been made yet.
        Mr. Flores. No payments, so you are sitting on 6 \1/2\
    billion dollars from 2015, and a billion seven for 2014. Now
    2016, what do you estimate to collect this year? What have you
    collected and what do you estimate full year collections to be?
        Mr. Slavitt. I don't have an estimation yet.
        Mr. Flores. I am sorry?
        Mr. Slavitt. I don't have an estimation yet.
        Mr. Flores. OK. What do you anticipate collecting for the
    Treasury for this year?
        Mr. Slavitt. I don't yet have an estimation.
        Mr. Flores. OK. Now I understand you have made early
    payments? CMS has made early payments to the insurance
    companies for 2016? What is that number?
        Mr. Slavitt. That was 2.7 billion.
        Mr. Flores. 2.7 billion for early payments to the insurance
    companies, OK. Moving back to the underlying issue, CMS changed
    its mind between March the 11th and March the 21st. As my
    colleague from Oklahoma said a few minutes ago, in light of the
    CRS memo, which contradicts the position of CMS with regard to
    compliance with the statute, will CMS correct its rule to back
    to the original interpretation of March the 11th?
        Mr. Slavitt. Congressman, we still believe we have the
    statutory authority to issue the rule that was issued.
        Mr. Flores. OK, so you are not going to change back to the
    original?
        Mr. Slavitt. No. We believe the rule of what we're
    following is supported by the statute.
        Mr. Flores. I disagree with you, but there we are.
        Moving to the second question, self-insured private
    companies, basically self-funded companies that are self-
    funding their employee health plans, are contributing to the
    traditional reinsurance fund even though they continue to cover
    employees and they haven't dropped employees from coverage,
    thereby forcing them to buy coverage on the exchanges. In other
    words, they aren't contributing to the reinsurance issues or to
    the potential draw on reinsurance, and some of these companies
    have paid out huge sums, over $50 million, to bring into this
    program that ultimately aids insurance companies.
        How can we justify the payouts to the insurance companies
    from these private companies who have maintained self-insured
    plans for the benefit of their employees and that don't have
    any stake in the exchanges? How do we justify that?
        Mr. Slavitt. That's what the statute contemplated
    originally, is my understanding.
        Mr. Flores. OK. And then so my question is how do you
    justify the payouts to the insurance companies from the
    employers that have no stake in the exchanges? Why did you
    change the formula and pay them more?
        Mr. Slavitt. Again this is all before my time, but that
    appears to be what the statute contemplated and exactly what
    happened.
        Mr. Flores. Just as an editorial comment, I used to be a
    CEO and I could not blame my predecessor. I could not say it
    was before my time. When my board asked me a question they
    wanted me to provide an answer, not to say, well, that is
    before my time. So I just want you to know my opinion on that.
    Thank you, I yield back.
        Mr. Slavitt. Understood, thank you.
        Mr. Murphy. I believe then that is all the questions we
    have from our members. So I want to thank you, Mr. Slavitt, for
    being here today. I want to ask you one quick question. Can we
    get a commitment from you that the CMS will provide the
    documents pursuant to our March 23rd request in a timely
    manner? These are the ones regarding the reinsurance program.
        Mr. Slavitt. Yes, Mr. Chairman.
        Mr. Murphy. Thank you. And because what we have got so far
    are the publicly available documents. Any idea when? Can you
    please tell us when CMS will produce these documents?
        Mr. Slavitt. We are working hard on it. We'll follow up
    with your staff. As you know we have schedule on some other
    documents we're working for you, so we can just put that right
    on the schedule and make sure we get you dates certain.
        Mr. Murphy. We would like that.
        Mr. Slavitt. OK.
        Mr. Murphy. Thank you very much. So in conclusion, thank
    you so much for being with us today. And I want to remind
    members they have ten business days to submit questions for the
    record, and I ask Mr. Slavitt to respond promptly to those
    requests as well. And with that, this hearing is adjourned.
        [Whereupon, at 11:38 a.m., the subcommittee was adjourned.]
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