[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
                           
                           
                           
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      Printed for the use of the Committee on Energy and Commerce

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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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