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









                    RISING HEALTH INSURANCE PREMIUMS
                     UNDER THE AFFORDABLE CARE ACT

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

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 12, 2016

                               __________

                          Serial No. 114-FC14

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
         
         
         
         
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                      COMMITTEE ON WAYS AND MEANS

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
DEVIN NUNES, California              CHARLES B. RANGEL, New York
PATRICK J. TIBERI, Ohio              JIM MCDERMOTT, Washington
DAVID G. REICHERT, Washington        JOHN LEWIS, Georgia
CHARLES W. BOUSTANY, JR., Louisiana  RICHARD E. NEAL, Massachusetts
PETER J. ROSKAM, Illinois            XAVIER BECERRA, California
TOM PRICE, Georgia                   LLOYD DOGGETT, Texas
VERN BUCHANAN, Florida               MIKE THOMPSON, California
ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
ERIK PAULSEN, Minnesota              RON KIND, Wisconsin
KENNY MARCHANT, Texas                BILL PASCRELL, JR., New Jersey
DIANE BLACK, Tennessee               JOSEPH CROWLEY, New York
TOM REED, New York                   DANNY DAVIS, Illinois
TODD YOUNG, Indiana                  LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania
JIM RENACCI, Ohio
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
ROBERT J. DOLD, Illinois
TOM RICE, South Carolina

                     David Stewart, Staff Director

                   Nick Gwyn, Minority Chief of Staff
















                           C O N T E N T S

                               __________
                                                                   Page

Advisory of July 12, 2016 announcing the hearing.................     2

                               WITNESSES

Joel White, President, Council for Affordable Health Coverage....     6
Christopher Condeluci, Principal, CC Law & Policy PLLC...........    22
Tom Harte, President, Landmark Benefits, NH......................    37
Peter Lee, Executive Director, Covered California................    51

                   MEMBER SUBMISSIONS FOR THE RECORD

The Houston Chronicle............................................   112

                    MEMBER QUESTIONS FOR THE RECORD

Representatives Dold, Noem, Smith of Missouri, Nunes and Black...   121

                       SUBMISSIONS FOR THE RECORD

American Academy of Actuaries, statement.........................   143
HealthPocket, Inc., statement....................................   152

 
                    RISING HEALTH INSURANCE PREMIUMS
                     UNDER THE AFFORDABLE CARE ACT

                              ----------                              


                         TUESDAY, JULY 12, 2016

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to call, at 10:10 a.m., in Room 
1100, Longworth House Office Building, the Honorable Kevin 
Brady [Chairman of the Committee] presiding.
    [The advisory announcing the hearing follows:]
    
    
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    Chairman BRADY. The committee will come to order.
    Welcome to the Ways and Means Committee hearing on the 
rising cost of health insurance premiums under the Affordable 
Care Act.
    Over 6 years have passed since President Obama and 
Democrats in Congress drafted the Affordable Care Act behind 
closed doors and forced it into our homes, our workplaces, and 
doctors' offices. Since then, the law has been one broken 
promise after another, starting with the promise in its very 
title ``affordable.''
    Millions of Americans have seen the cost of health care 
increase to astonishing levels, while quality, choice, and 
access have hit new lows. Meanwhile, the White House refuses to 
acknowledge that Obamacare is simply failing ahead of schedule 
and that the pain it has inflicted so far may be nothing 
compared to what lies ahead for millions of Americans and their 
families.
    So we are holding this congressional hearing today to make 
clear that Obamacare's broken promises have real impacts on 
real people. And because we care deeply about providing 
Americans with access to high quality affordable health care, 
House Republicans have released a detailed credible plan for 
repealing the ACA and bringing patient focus care back to the 
American people. The truth about this law, it has never 
expanded access to affordable high-quality health care of an 
individual's choosing and it never will.
    Estimates show that increases in 2017 could be double what 
we see this year, and in several States, these costs could 
spike by more than 50 percent with no end in sight. A 50 
percent increase is outrageous. Americans simply cannot afford 
to pay 50 percent more for their premiums. One reason costs are 
skyrocketing, enrollment is far lower and far more expensive to 
cover than projected. That is why, in addition to raising 
premiums, many insurers have shrunk their provider network, so 
for individuals and families to purchase coverage, it costs 
more, and with that more expensive coverage, they get fewer 
choices and less access to doctors and providers who best meet 
their needs.
    Even after raising premiums and narrowing provider 
networks, many insurers are still struggling to shoulder the 
cost of doing business in the Affordable Care Act's mandate-
ridden marketplaces. Every month we learn of more insurers who 
decided to leave the flawed Obamacare exchanges altogether. In 
April, United Health Group announced that it would be forced to 
exit many of the exchanges it was participating in because it 
couldn't sustain the crushing losses. After United leaves, 1.8 
million Americans will have only two insurers to choose from, 
and over a million will only have one.
    And some Americans, including thousands in my home State of 
Texas, may not have any insurers to choose from at all. In 
fact, BlueCross/BlueShield of Minnesota has announced their 
exit from the State after suffering more than a half a billion 
dollars in losses over just 3 years.
    I, like many of my colleagues, have heard countless stories 
from families who are deciding it is just not worth paying the 
high prices to get Washington-approved coverage. Instead they 
are choosing to pay a stiff tax penalty rather than buy a plan 
they can't afford and don't want. And it is not just a few 
Americans. In States like New York, Iowa, Colorado, Arkansas, 
Minnesota, and South Dakota, more than three out of four people 
eligible to purchase exchange plans have found a way not to be 
covered in Obamacare.
    I have no doubt we will hear today about families getting 
health insurance under Obamacare, but the reality for many of 
my constituents is that now they have to worry year to year 
about access to the right plan, access to the same team of 
specialists, and changes to their out-of-pocket costs. What is 
the point of expanding coverage if you can't afford or get 
access to care?
    Over the past year, I have received letters from Texas 
families that are caught in the middle of the downward 
pressures of Obamacare's regulations and mandates. For example, 
especially hospitals my constituents rely on are being squeezed 
out of network. I would like to enter into the record two 
Houston Chronicle articles highlighting the struggles of 
families to get the specialized treatment they need. This is a 
direct result of Obamacare's mandates and rigid rules.
    Americans have had enough of the Obamacare experiment and 
government-run health care. That is why we are dedicated to 
repealing this flawed law in advancing patient focused 
solutions that truly expand choice and access to high quality 
affordable health care.
    I want to thank all the witnesses for being here today. I 
look forward to hearing your thoughts on how we can work to 
make our healthcare system work better for the American people.
    People across our country all want the certainty of knowing 
they will have access to the care they need when they need it 
most. This is what Americans deserve, and it is what our 
committee will keep fighting to deliver. I now yield to the 
distinguished Ranking Member from Michigan, Mr. Levin, for the 
purposes of an opening statement.
    Mr. LEVIN. Thank you, Mr. Chairman. Essentially what we 
have heard is the campaign message of the Republican party 
against ACA, and that is the purpose of this hearing today, 
essentially bringing the campaign attack of the Republican 
party within the halls of Congress, and we look forward to that 
debate.
    We had a situation, 50 million people in this country 
without any healthcare coverage. We had skyrocketing costs of 
health care, we had skyrocketing increases in premiums, and 
essentially what was decided after 50 years of inaction, we 
decided to do something about it, and what we decided to do was 
experiment with a combined program of expanding Medicaid and 
other government-based programs with the private sector of the 
United States of America.
    We expanded Medicaid, and in Texas, because of the action 
of the leadership there, well over a million people did not 
benefit from the expansion of Medicaid in your State, Mr. 
Chairman. While in the State of Michigan, a Republican governor 
decided to take advantage of the expansion of Medicaid and 
brought real healthcare coverage to hundreds of thousands of 
people in this country in the State who needed it.
    The Republicans have never come up with a comprehensive 
substitute for ACA. Instead, attack after attack, repeal 
effort, after repeal effort, and the number now is what, well 
over 60, and so you essentially can mark up today as whatever 
the number is, the next effort in the Republican party to 
attack and to try to undo the healthcare structure that has 
brought coverage to millions of people in this country and also 
brought down premiums.
    So the experiment, as I said, was with combining public and 
private sector. It is controversial, even at times within the 
Democratic party. The Republicans essentially wanted to have a 
totally private system in this country, including to privatize 
Medicaid, privatize everything, and now, essentially, this 
hearing is being held to attack what is happening in the 
private portion of healthcare reform. Ignoring the millions of 
people in this country who have benefitted from the expansion 
of health care, millions, millions.
    So this debate, this hearing is nothing more than another 
part of the political debate in this presidential year. And we 
understand the need to address issues relating to premiums. Mr. 
Lee will give some background on this, and we will continue to 
address this issue.
    The Republican party has failed to take steps that would 
have been able to address the issue of premium cost where they 
are going higher, up higher in some States than in most others. 
They fail to do this, and so therefore, they essentially now 
are attacking some of the results of their own making.
    So take this for what it is worth, we welcome you. We don't 
say that you gentleman here today are part of the political 
process. You have a distinguished background, but you should 
understand, the hearing today is part of the political debate 
of this year, and we Democrats welcome the opportunity to 
tackle this issue as to how, after 50 years, we began to 
address this issue while the Republican party, for all these 
years, has been bankrupt and remains bankrupt as to how they 
would undertake a major change that would benefit millions of 
people who today can go to sleep knowing that they will have 
healthcare coverage. I yield back.
    Chairman BRADY. Without objection, all the members' opening 
statements will be made part of the record.
    Today's witness panel includes four experts, Joel White is 
president of the Council for Affordable Health Coverage; 
Christopher Condeluci is a principal of CC Law & Policy, PLLC; 
Tom Harte is president of Landmark Benefits representing the 
National Association of Health Underwriters; Mr. Peter Lee is 
executive director of Covered California.
    The committee has received your written statements, and 
they will all be made part of the formal hearing record. You 
each have 5 minutes to deliver your oral remarks. We will begin 
today with Mr. White. You may begin when you are ready.

  STATEMENT OF JOEL WHITE, PRESIDENT, COUNCIL FOR AFFORDABLE 
                        HEALTH COVERAGE

    Mr. WHITE. Chairman Brady, Ranking Member Levin, Members of 
the Committee, I appreciate the opportunity to testify today. 
My name is Joel White. I am the president of the Council for 
Affordable Health Coverage, which is a broad based alliance 
with a singular focus, and that is, bringing down the cost of 
health care for all Americans.
    Our membership reflects a broad range of interests, 
organizations representing patients and consumers, small and 
large employers, insurers, and physician organizations. We are 
concerned that healthcare costs are too high and are rising too 
fast. In fact, costs continue to outpace GDP, the economy, and 
premiums are increasing about three times as fast as wages. As 
a result, by 2030, the typical American family will spend more 
than half their income on health care.
    As we all know, the ACA made massive changes to health 
markets, some positive and some negative. It created new 
consumer protections, corrected market imbalances, and reduced 
the number of uninsured Americans to historic lows. Yet 
overreach by the ACA has also contributed to high and growing 
health insurance premiums marked by average double-digit price 
increases both this year and next.
    For example, this year, average premiums for both bronze 
and silver plans, which represent 92 percent of the market, 
increased by double-digit rates. Next year, the requested 
weighted medium premium will increase 19.2 percent based on 
rates already filed. This ranges from a high of 56 percent in 
Tennessee to a low of 3.6 percent in Rhode Island.
    In addition, cost sharing, including copayments, 
coinsurance, deductibles, and the use of these strategies and 
formularies is increasing faster than premiums. For example, in 
2016, the average silver plan had a $3,000-plus deductible. 
That reflects an increase of about 20 percent from 2015. The 
factors impacting premium rates and cost sharing increases 
include rising medical costs, mandated benefits and regulatory 
changes, and a risk pool that is smaller, older, and sicker 
than originally projected.
    Despite the broad array of available plans on exchanges and 
a tax for being uninsured, many of those who have been expected 
to sign up for coverage, even those eligible for subsidies, 
have not done so. Why? I think simply the point is people don't 
want exchange plans at the prices they are being offered. They 
are too expensive and have too significant cost-sharing 
requirements. In fact, a study that CAHC released last month 
shows participation rates vary with the generosity of 
subsidies.
    Eighty-one percent of those receiving a full premium 
subsidy signed up for a plan. Just 2 percent of the nonsubsidy 
eligible population enrolled in exchange coverage this year.
    As a result, enrollment is only about half of what CBO 
originally projected. ACA risk pools are thus smaller and 
sicker. So while many Americans with significant health needs 
or lower incomes have greater access to coverage now, the 
reality is that for millions of others, health coverage is less 
affordable and more out of reach than when the ACA was created 
6 years ago.
    The fact, this fact should spur Congress to enact 
bipartisan reforms to help stabilize and improve markets, 
making healthcare more affordable and accessible for all 
Americans. Increasing premium subsidies to encourage enrollment 
is not the answer in my opinion. This approach will shift 
costs, not contain them. Remarkably, some are even proposing 
fewer choices and less competition through public options and 
standardized benefit designs.
    The fact is, we have tried the top down approach that 
relies on mandates and penalties, and costs have increased 
unsustainably as a result. CAHC believes that it is time to try 
market-based solutions that expand choice and competition to 
lower costs. One of most effective ways to lower premiums on 
the exchanges is by broadening and improving the risk pool. 
Greater participation rates in exchanges would lower average 
costs by spreading risk across a bigger population.
    In my written statement, I outline 13 policy proposals to 
help achieve these goals. Briefly, these approaches would 
create competition across public and private exchanges, allow 
subsidy portability so consumers can use their support for 
plans they want and need, allow more flexibility for plans and 
employers, address medical cost growth, and promote 
transparency for plans and providers. I look forward to 
responding to any questions you may have. Thank you, Mr. 
Chairman.
    [The prepared statement of Mr. White follows:]
    
    
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    Chairman BRADY. Thank you. Mr. Condeluci, you are 
recognized.

STATEMENT OF CHRISTOPHER CONDELUCI, PRINCIPAL, CC LAW & PUBLIC 
                          POLICY PLLC

    Mr. CONDELUCI. Thank you, Chairman Brady, Ranking Member 
Levin, and Members of the Committee for the opportunity to 
speak with you today. My name is Chris Condeluci----
    Chairman BRADY. Mr. Condeluci, could you pull that 
microphone down just a little bit closer.
    Mr. CONDELUCI. Yes, sir.
    Chairman BRADY. Perfect.
    Mr. CONDELUCI. My name is Chris Condeluci. I am the sole 
shareholder of CC Law & Policy, a legal and policy practice 
that focuses on issues relating to the Patient Protection 
Affordable Care Act, the ACA. Prior to starting my own 
practice, I served as counsel to the Senate Finance Committee 
where I participated in drafting portions of the ACA, including 
the ACA exchanges, the State insurance market reforms, and all 
of the taxes under the new law.
    In my practice, I provide legal counsel to stakeholders 
ranging from employers to insurance carriers to the ACA 
exchanges and private exchanges. I also provide policy analysis 
on the implementation of the ACA.
    It is important to emphasize at the onset of my testimony 
that there is no one single event or ACA implementation 
decision that has contributed to increased premium rates. 
Instead, there are a number of contributing factors that, when 
added up in the aggregate, can objectively be viewed as the 
causes for the rise in premiums. These factors include but are 
not limited to, first, the statutory requirements under the ACA 
itself. In particular, the new minimum insurance standards in 
addition to the adjusted community premium rating rules.
    These statutory requirements constrain an insurance 
carrier's ability to develop plan designs for a specific niche 
of consumers in the market; for example, young and healthy 
consumers who may want coverage of a limited number of medical 
services at a very low price tag, along with high risk 
individuals with specific chronic illnesses like diabetes or 
health disease--or heart disease, excuse me. These statutory 
requirements also push premiums higher, discouraging younger 
healthier individuals from entering the risk pool.
    Second, two ACA implementation decisions that have been 
made by the Obama administration. In particular, the 
administration's transitional policy, which segmented the risk 
pool in certain markets and which has prevented healthier risks 
from entered the ACA's newly reformed risk pools. This also 
includes HHS' and other State-based exchanges limited 
enforcement of the eligibility criteria for enrollment during 
certain special enrollment periods.
    Third, the failure of the individual mandate penalty tax 
having its intended effect of encouraging younger healthier 
individuals to purchase insurance coverage. These factors, when 
aggregated together, are resulting in an unbalanced risk pool, 
and the consequences of an unbalanced risk pool are increased 
premiums.
    What does it mean to have an unbalanced risk pool? In 
short, an unbalanced risk pool arises when the pool is made up 
of a number of less healthy, heavy medical utilizers, and a 
smaller number of younger healthier individuals. Is the ACA's 
newly reformed individual market unbalanced? Data from HHS 
indicates that only 28 percent of individual market exchange 
plan enrollees are between the age of 18 and 34.
    Actuaries have suggested that 40 percent of exchange 
enrollees in this age cohort are needed to ensure a balanced 
risk pool. The IRS has also indicated that 45 percent of the 
7.9 million people who paid the individual mandate penalty tax 
in 2014 were under age 35.
    Objective analysts have also observed that less healthy 
heavy medical utilizers have been attracted to the exchanges, 
and much of the increased medical claims in 2014 and 2015 came 
from individuals who have enrolled during certain special 
enrollment periods.
    One logical solution to balancing out the risk pools 
attracting more younger and healthier individuals into the 
market; however, due to the manner in which the ACA constrains 
insurance carriers in developing plan designs that may appeal 
to younger and healthier individuals, these consumers are less 
likely to enter the market.
    In addition, the three to one age variant now required when 
developing premium rates increases premiums for younger 
healthier individuals, which discourages these good health 
risks from obtaining coverage.
    Another solution is allowing the individual mandate penalty 
tax to achieve its intended result. Unfortunately, to date, 
objective analysts have not found that the individual mandate 
is causing younger healthier individuals to purchase an 
individual market plan, evidenced by the HHS and IRS data that 
I referenced earlier. And while the individual mandate penalty 
tax increased by 600 percent in just 3 years, the penalty tax 
will only be indexed to CPI in 2017 and the 2.5 percent of 
income threshold will remain constant. It is unlikely that the 
slow growing penalty tax will have a substantive impact in 
future years.
    If younger and healthier individuals do not enter the 
market, the risk pool will remain unbalanced, which will cause 
insurance carriers to continually increase premiums. Although I 
have laid out some of the factors that have led to an 
unbalanced risk pool in the individual market, which have 
contributed to premium increases, these are solvable problems.
    I look forward to working with the witnesses who appear in 
front of you today as well as you, Mr. Chairman, Mr. Levin, and 
all the Members of the Committee. Thank you for your time. I 
look forward to answering any questions you may have.
    [The prepared statement of Mr. Condeluci follows:]
   
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    Chairman BRADY. Thank you. Mr. Harte, you are recognized.

    STATEMENT OF TOM HARTE, PRESIDENT, LANDMARK BENEFITS, NH

    Mr. HARTE. Good morning. Thank you, Chairman Brady, Ranking 
Member Levin, and distinguished members of this committee.
    As I mentioned earlier by the chairman, my name is Tom 
Harte, and my company is Landmark Benefits. I am an employee 
benefits broker. I own a small business. I deal with hundreds 
of employers throughout the year on their health insurance 
benefits, hundreds of individuals trying to access health 
insurance, so I come here today with a very unique perspective, 
with conversation I have with my clients every day, every year 
with regard to the continued challenges that they have with 
access to health care as well as access to affordable plans.
    I am also here representing the National Association of 
Health Underwriters, which represents well over 100,000 
employee benefit professionals like myself that are in the 
trenches every single day trying to find these affordable 
solutions.
    Before I jump into some of my comments with regard to the 
challenges that I am seeing, I want to also share with you some 
of the successes that we have seen over the past 12 months, 
that are welcome from me on the frontline of marketplace, 
things like passing the PACE Act. In New Hampshire, that made a 
big difference. By allowing our State the opportunity to 
determine what size group is best for our insureds, but also 
avoiding, as Mr. Condeluci referred to, the rate grids and 
three to one ratios by allowing my insurance commissioner to 
determine what is the best size group for my State, that has 
significantly helped us with was with rate grade overload.
    Also, the moratorium on the medical device tax, the 
suspension of the health insurance tax, as well has the delay 
of the Cadillac tax, those are all very welcome from the 
clients that I represent every day.
    Ranking Member Levin, you also talked about the uninsured 
rate. We love the fact that more people are getting insured. We 
love the fact that healthcare trend is coming down. Those are 
all welcome signs to us in the industry.
    But at the same time, when I talk to my clients, what I 
thought it would be helpful for you is if I went to some of the 
renewals that we are experiencing over the past couple of 
months in 2016, my renewals for my clients in the past couple 
of months that we looked at have ranged anywhere from just over 
11 percent to just shy of 30 percent. Now, these are small 
businesses like mine. I have 20 employees, but some of the 
clients that I represent have thousands of employees. Those 30 
percent rate increases are not just for a select group of small 
businesses. They are also affecting large businesses that we 
represent in the New England area.
    In addition to that, when I look at my clients and where 
their health plans have been over the past few years, I have 
seen plans transform themselves. And in my written testimony, 
you will see that some clients 10 years ago had $1,000 
deductible and today they have a $5,000 deductible. So when I 
look at healthcare trend, and again, I welcomed healthcare 
trend to continue to come down, healthcare trend does not 
necessarily represent the renewals that I am delivering to my 
clients.
    So if the healthcare trend is, let's just say it is 8 
percent, because there is different arguments out there with 
healthcare trend, that doesn't take into account utilization, 
demographic trends, pooling charges, risk adjustments, and many 
of the fees that my clients are paying through the passage of 
these premiums.
    In addition to that, every single client I sit down with, 
they are having a reduction in benefits not by their own 
decision. They are seeing primary care office copays go from 
$25 to $50, specials copays go from $50 to $100. Some are 
paying $500 a month for a 30-day prescription at a retail 
pharmacy, and that is unacceptable. So what has happened is, 
with our uninsured rate falling, we are seeing a greater issue 
of the underinsured.
    Now, what I mean by that--and again, in my written 
testimony, I provided you several graphs, but I wanted to do, 
and I did this over the weekend for you, was to show you the 
growth in deductibles for some of my clients. Now, I took one 
of my account managers at my company and I took their book of 
business, and I said: Over the course of a 9-year period, what 
has happened to the deductibles for these particular clients.
    So I picked them at random, and what I saw was from 2006 to 
2015, over a 9-year period, the deductibles for those clients 
increased by 479 percent. Over a 5-year period, they have 
increased by 329 percent. Over a 3-year period, 137 percent. So 
I am submitting to you that a lot of the employees that we 
insure every single day could not afford, 9 years ago, $1,000 
deductible, and today, they certainly can't afford a $6,300 
deductible. And I have to submit to you also that many of our 
larger clients have moved to these higher deductibles, putting 
their employees in a place where they can't afford to access 
basic general health care.
    What I will say to you last, and that is one of the 
greatest problems that I have in the health insurance industry 
is a lack of transparency. Now, I am fortunate. On my iPhone, I 
have access to an app that will show me how much it costs to 
have access to health care from one facility to the next. But 
what will alarm you is that when you look at the statistics, 
and you can look at my home State of the New Hampshire, and all 
I did was a 30-mile radius from my hometown of Windham, New 
Hampshire, and I found that an MRI of the spine has a 436 
percent difference from the least expensive facility to the 
most expensive facility. And I can name for you several 
different medical procedures that have similar differentials in 
healthcare costs, but one of the challenges that we need to 
focus is transparency in health care. Thank you.
    [The prepared statement of Mr. Harte follows:]


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    Chairman BRADY. Thank you. Thank you. Mr. Lee, you are 
recognized.

 STATEMENT OF PETER LEE, EXECUTIVE DIRECTOR, COVERED CALIFORNIA

    Mr. LEE. Good morning, Chairman Brady, Ranking Member 
Levin, and distinguished Members of the Committee. It is a 
pleasure to be with you today.
    My name is Peter Lee, and I am the executive director of 
Covered California, the State of California's marketplace 
implementing the Affordable Care Act.
    And what I would like to speak to briefly, and it is in 
more detail in my written remarks is first how the Affordable 
Care Act is working today; second, taking a look at what are 
the prospects for health insurance premiums in 2017; and third, 
some of the tools we are using in California to bring 
competition and affordability to California's consumers.
    So first, the Affordable Care Act is working on many 
levels. Nationally, the share of Americans of all ages who are 
uninsured has fallen to the lowest level in history. 9.1 
percent at the end of 2015. In California, 8.1 percent.
    In addition, Americans have reported that they are spending 
less of their money, less struggling to meet their healthcare 
expenses than ever before. Now, this means 16 percent of 
Americans say they have trouble meeting healthcare bills. That 
is still a lot of Americans having trouble, but it is lower 
than it has ever been.
    As we look ahead, it is important to remember that before 
the Affordable Care Act, consumers in the individual market 
regularly saw double-digit rate increases, saw increases that 
we just heard employers are seeing today, up to 30 percent. But 
in the old days, consumers couldn't change, couldn't shop, 
couldn't move plans. They now can.
    The Affordable Care Act has slowed rate increases, creating 
competitive markets that are giving consumers the power to shop 
for better value.
    Now, in California, last year, our rate increase was, on 
average, 4 percent. But if consumers shop to find the lowest 
cost plan available to them in their area at the same level, 
they would have reduced their cost by 4-and-a-half percent. 
That is the power of a marketplace working.
    In addition, through the expansion caused by the Affordable 
Care Act, of 10 million people having subsidies, those are 
generally healthy people lowering costs to all Americans 
because they are now part of the risk pool, as you have heard 
many of the speakers speak to the importance of the risk pool.
    So 2017, let's look ahead. It is going to be a transition 
year, and I think that it is important to know the main factors 
for that. First, the temporary reinsurance program is going 
away. That has been a program that has helped keep premiums low 
the last few years. It will have a 1 year impact. Experts 
estimate between 4 and 7 percent one time, and then that goes 
away.
    Second, plans have had trouble pricing, and you have heard 
this from a number of the witnesses already, in particular, 
States that did not transition to a common risk pool, plans did 
not know how to price, to get pricing right is difficult, and 
there is a number of plans that are adjusting this year, but by 
the end of next year, those transitional plans are going to be 
gone, all one risk pool.
    Third, a number of plans have struggled with understanding 
this special enrollment people coming in. We have seen that 
issue being unforeseen by plans. We have also seen new 
guidelines and processes, both Federal and State level that 
should mitigate those problems in the future.
    Trends are going up because healthcare costs are going up, 
and a key part of that, especially drug costs and 
pharmaceutical costs.
    But finally, what is keeping rates down is competition. 
Competition drives pricing. Let me speak to you briefly about 
what we are doing in California to make sure that consumers are 
the drivers of the healthcare marketplace.
    First, in California, we actually actively solicit health 
plans to participate in our marketplace, but we don't take 
everyone. They have to agree to play and try to improve 
healthcare delivery. They need to offer standard patient-
centered designs, that make sure when consumers have a 
deductible, that deductible doesn't stand in front of a 
consumer in getting their primary care, which is never the case 
in our standard benefit designs.
    It also means, those patient-centered designs, consumers 
can truly shop for what they really care about, which is the 
networks, the prices, and which doctors are in those networks. 
That is what consumers care about. They are able to shop in 
California, and that shopping is driving plans to put better 
prices on the table.
    Now, I would note that, in California, we actually have 
from the most recent study from CMS, the lowest risk score, 
meaning we have the healthiest risk mix in the Nation. Risk mix 
is a core part of what we all have to be doing. That requires 
extensive marketing like we are doing, working with insurance 
agencies we have been doing, and having the subsidies that 
bring people to the table. But also, we have to be changing the 
underlying cost of health care.
    The fundamental issue we have is health care is too 
expensive in America. Covered California has as part of our 
contracts with our health plans, requirements that they do 
things like make sure a consumer has a doctor within 60 days. 
That is a new requirement starting this next year. Making sure 
that they are paying differently to align with that work to 
actually improve the quality of care, which is the real driver 
of health care.
    Our job is not done. I look forward to taking your 
questions now, but I also look forward to the work that we are 
all doing to improve on the Affordable Care Act. Thank you very 
much.
    [The prepared statement of Mr. Lee follows:]
    
    
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    Chairman BRADY. Thank you all for your excellent testimony. 
We will now proceed to the question and answer session, and I 
will begin.
    I know it is sort of common to just claim Republicans are 
fighting against Obamacare, but in our view, we are fighting 
for patients and local businesses who have been hurt by this 
law. I have a constituent in Huntsville who purchased coverage 
for his family on the Federal exchange. He wrote to me: My 
health insurance costs $989 a month. That is almost a 1,000 
percent increase in healthcare costs. So much for being 
affordable, but what can we do?
    Another constituent from the Woodlands where I live writes: 
The second year in a row, BlueCross/BlueShield is canceling my 
policy. Further, for 2016, no insurance carrier in Texas is 
offering individual PPO policies. So much for choice. My 
insurance premiums for the closest of coverage to what I have 
now, going up $200 a month after going up $900 a month in 2015. 
So much for insurance rates going down. So much for more 
choice.
    Now, look, many of my constituents are worse off now than 
they were before this law was passed. Certainly those who like 
their healthcare plan, many of them couldn't keep to them at 
all. Mr. White, some of the work your organizations have been 
done, I think it is worth highlighting, when the ACA was being 
debated, we were told by CBO that over 20 million people would 
want to enroll in the individual exchanges. That has not proven 
to be true at all. It is less than half of that number who 
actually enrolled.
    We also were told young healthy people are signing up at 
much lower levels than expected. As you pointed out, only 37 
percent of people, of those who enrolled, were under the age of 
34.
    So why are so few people enrolling in these plans? And in 
New York, one out of five that could get help in those 
exchanges are in the exchange, one out of five are in there.
    Mr. WHITE. I believe it is a combination of factors, but we 
believe the primary factor is cost. These are just not 
producing the value for people in ways that they want to sign 
up for these plans. They are very high deductibles, very high 
cost-sharing amounts, and coupled with the premium, I mean, in 
your example, the $900 a month, that individual is spending 
more than $10,000, right, a year on the premium, probably with 
a significant deductible. Some of what we are seeing in the 
marketplace is 5, 6, 7, $10,000 deductibles. So if you are 
paying $10,000 on the premium and a $10,000 deductibles, you 
wonder does that actually make sense, or would I just pay the 
individual mandate tax penalty and self-insure us, in effect.
    Chairman BRADY. Yeah. Thank you. Mr. Condeluci, do you 
think--are you surprised enrollment was so much lower than 
predicted? Do you see any change?
    Mr. CONDELUCI. I think there are two reasons for the lower 
than anticipated enrollment. One is the transitional policy 
that I cited, as Mr. Lee spoke about. In short, the 
transitional policy allowed not only individuals in the 
individual market but employees of small employers to stay on 
nonACA compliant plans.
    So while the Congressional Budget Office, for example, 
expected a number of smaller employers to drop coverage, those 
small employers did not drop coverage and send their 
individuals to the individual market exchange market due to the 
fact that they could stay on their nonACA compliant plan.
    Now, not every State has adopted this transitional policy, 
but for my count, there are about 35 to 40 States that have 
indeed adopted a transitional policy both in the individual 
market as well as the small group market. So I think that is 
one of the reasons why you are not seeing as much enrollment.
    The other is, we touched on it, I spoke about it in my 
testimony, is the younger and healthier folks are not finding 
insurance appealing, and the minimum insurance standards and 
the adjusted community rating rules, while consumer protections 
that were arguably needed in the marketplace are carrying with 
them higher costs. It is just the nature of how it works. If 
you have a health plan that is covering more benefits for 
medical services, that is going to become more expensive. So 
the carriers, in an effort to try to develop premium rates that 
are reasonable, had to increase the cost sharing, so shift more 
costs onto the policyholder, as well as narrow the networks by 
pushing out some of the providers or reducing the provider 
payments for those doctors and hospitals that are in that 
network. And those actions are making insurance unattractive, 
in addition to the cost increases that you might see.
    The last point is, I do recognize that the premium subsidy 
for those folks who are subsidy eligible, between 100 percent 
of the Federal poverty level and 400 percent of the poverty 
level, do get a premium subsidy if they are purchasing an 
individual market plan through an exchange, and that does blunt 
much of the premium increases.
    But younger folks are still paying a percentage of income 
out of their own pocket for a policy. That is what the statute 
requires, and that also is not enough to convince a younger, 
healthier individual to purchase a plan when you are balancing 
that or balancing that up against a fairly low individual 
mandate penalty tax.
    Chairman BRADY. Thank you. Mr. Harte, you looked at trends 
with your real world people that you are trying to cover in 
their plans. So do you see anything changing? I mean, do you 
see costs continuing to increase? Do you see networks 
continuing to narrow going forward?
    Mr. HARTE. Even if we just looked at medical trend and just 
said that premium increases were a direct correlation to 
medical trend at 8 percent, that means that health insurance 
premiums will double in about 7--I am sorry, 9 years. That is 
unacceptable. So I have always preached from the choir. I have 
talked so much about it. Health insurance is expensive because 
health care is expensive.
    Now, within the ACA, medical loss ratio is built in there, 
and it was a safeguard from insurance companies, from taking 
and collecting too much in premium and not paying enough out in 
health care. So when I talk to folks all over the country, I 
say, well, why don't we start focussing in on, as ACA 
determined, the 80 to 85 percent of premium dollars that go to 
pay for health care.
    So when I talk about transparency or when I talk about 
wellness initiatives and other ways to reduce the cost of 
health care, that is the real solutions for us to start 
considering in having a long-term impact on employer solutions.
    So in answer to your question, Chairman Brady, I don't see 
any light at the end of the tunnel based upon current 
regulations, current legislation, current environments, and on 
all the issues that this panel has talked about today with 
losing carriers and increased premiums, I, myself, see my 
clients continue to be faced with double-digit rate increases 
for the next 5 years.
    Chairman BRADY. Yeah. Well, we were promised that families 
would have lower premiums by $2,500 a year. I haven't found one 
family in my district do that. When medical trend costs are 8 
percent but some States are facing 50 percent increases in 
premiums, there is a deeper problem here, in my view.
    So I now recognize the distinguished Ranking Member from 
Michigan, Mr. Levin, for your questions.
    Mr. LEVIN. Now, Mr. Chairman, remember that 85 percent of 
the people in the marketplace are receiving some assistance to 
obtain health care. So for them, their premiums are lower than 
it otherwise would be.
    Mr. Condeluci, you are shaking your head yes. I mean, look 
at the whole picture. Look at the whole picture. You don't want 
to do that, including in Texas. And you said the number of 
people in the marketplace is less than expected. There were 
various estimates. But how many people are in the marketplace 
who otherwise would not be? We are talking about what, 10 
million? And the majority sat here for years in the majority 
and never did anything at all to address the disgraceful fact 
in this country, 50 million people going to sleep every night 
without any healthcare coverage in terms of insurance.
    And how much were premiums going up before ACA, Mr. Harte? 
How much were they going up annually, before ACA?
    Mr. HARTE. Before ACA, double digits every year.
    Mr. LEVIN. Okay. So you just do that over your 5-year 
period. So you had premium increases before ACA, double digit, 
they were something like 14, 15 percent a year on average, 
right?
    Mr. HARTE. Yeah.
    Mr. LEVIN. And yet the Republican majority sat here doing 
nothing. So let's, Mr. Lee, talk a bit about the risk pool 
issue, because we all knew it was a factor, and in fact, when 
we had whatever you want to call it, the penalty or the 
provision, there was debate as to where it would set to try to 
stimulate people to be covered.
    We also should remember, in terms of younger people, how 
many people are now covered through their parents' insurance 
who were not covered before. Anybody know, on the panel, the 
number of people covered as a result of that? Mr. Lee.
    Mr. LEE. I believe about 2-and-a-half million? Under 26-
year-olds are on their parents' policies.
    Mr. LEVIN. So Mr. Lee, you want to comment on this issue in 
terms of the risk pool and others, because my guess is, at 
least in terms of some of you, you might be willing to sit down 
and discuss how we make ACA work even better. I am not sure how 
much you are part and parcel reel of this repeal or rip up ACA 
effort by the majority here. So let's talk for just a minute. I 
have just under 2 minutes.
    Mr. Lee, how do we address the issue of more and more 
younger people coming in? There has been some discussion, 
eliminate the minimum standards. I don't think you want to do 
that entirely. Right, Mr. Condeluci, you don't want to do that?
    Mr. CONDELUCI. Yes, sir. I am not suggesting that you 
eliminate the minimum insurance standards, but from at least my 
perspective, my opinion, of course, those minimum standards are 
a bit constraining. The essential health benefits, for example, 
and the actuary value requirement, which is tied to the 
essential health benefits, essentially require plans to cover 
benefits and services that many policyholders don't want or 
need, depending on the type of individual, but those 
individuals still have to pay for those services.
    Mr. LEVIN. Okay. So as we continue to improve ACA, we will 
discuss that. Mr. Lee, you want to comment?
    Mr. LEE. Yeah, a couple of things. One is it is really 
important for, in the marketplace, where we are providing 
subsidies, as you know, to California, about 90 percent of the 
people that enroll, it is about affordability, and we are still 
new in this venture of educating and doing outreach.
    We spend, in California $100,000,000 to do marketing and 
outreach. We are selling insurance. Because even with the 
subsidy, people are making a choice to use some of their hard-
earned dollars to buy insurance.
    And the issue about the penalty has come up, but I want to 
be clear. We have done a lot of market testing, surveying, the 
big issue is can people afford it on a day-to-day basis, and 
the penalty is part of the equation, but I think the issue 
about affordability is critical, the issue about doing 
effective marketing and outreach is vital.
    In California, last year, 38 percent of our enrollment was 
in that targeted age range. It takes time to change from a 
culture of people just coping and thinking they cannot get 
coverage to having a culture of coverage, and that is what we 
are moving into, and it is going to take ongoing effort.
    Mr. LEVIN. Thank you.
    Chairman BRADY. Thank you. All time is expired.
    Mr. Johnson, you are recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman. You know, thanks to 
Obamacare, my constituents are facing rapidly rising health 
insurance premiums, as well as, problems accessing care.
    Earlier this year, NBC 5 in Dallas ran a story about a 
Plano couple by the name of Cris and William Lyle who bought 
health insurance through healthcare.gov. Their plan cost $435 a 
month, but here is the thing. The Lyles had a problem finding a 
doctor according--and that is happening again today. According 
to the news piece, they reached out to about 20 doctors, but 
not one of these docs took their insurance. Ultimately they 
were able to find a doctor, and they were also concerned about 
finding a specialist.
    Mr. Condeluci and Mr. White, the Lyle story is becoming all 
too common as health insurers are narrowing their networks in 
an attempt to keep costs down. In fact, a recent study found 
that over half the plans on the exchanges were narrow network 
plans like HMOs.
    So first with you, Mr. Condeluci, doesn't that make it 
harder for consumers, such as the Lyles, to actually see the 
doctors they want and get the care they need in a timely 
manner?
    Mr. CONDELUCI. I will answer your question, sir, and say 
yes, generally speaking. The other kind of caveat to that is, 
you know, some folks don't mind, let's say, handcuffing 
themselves to a particular provider or a particular health 
system. So in that case, maybe that consumer is okay with 
having a narrow network which does carry with it lower cost. 
But there are other policyholders, and as we all know, everyone 
has different needs, different desires, different aversion to 
risk, and those individuals might not want to handcuff 
themselves to just that particular health system or healthcare 
provider, and that limits the choice for that particular 
individual, which then, I would argue, makes insurance 
unappealing. If you add the added cost, as we have discussed, 
and just as a followup to Mr. Levin's question, with these 
minimum standards, again, they carry with it increased cost.
    There are new premium rating rules that actually increase 
cost for younger healthier individuals. It is those type of new 
minimum standards, while very good consumer protections, are a 
bit constraining that if they were loosened up, could allow an 
insurance carrier to let's say offer more broad networks at a 
reasonable price point as opposed to being forced into the 
position to narrowing that network in order to lower cost to 
offer it to consumers.
    Mr. JOHNSON. Mr. White, do you agree with that?
    Mr. WHITE. I do agree with that. I think this is a logical 
response to the constraints of the law. The Affordable Care Act 
basically says you have got to cover all these benefits, you 
have got to offer it within these metal tiers, and you can't 
use the premium rating tools that you would normally use pre-
ACA. And so there are only a few places that the insurers could 
go to compete based on a premium price point, and that was 
largely on a cost-sharing side and then on the narrow network 
side.
    And so they tried to use those tools to negotiate rates 
through the narrow networks, and that was an important tactic, 
I think, early on in the ACA.
    What we are seeing now is fewer PPOs on the exchanges, so 
there are more narrow networks definitely emerging, and then 
off exchange, we are seeing a lot more broader networks, a lot 
more access to specialists and other types of providers.
    So this is a logical response to the law. It is 
unfortunate, but you know, we believe it can be addressed 
through additional flexibility on the exchanges.
    Mr. JOHNSON. Is it true, in your opinion, that some people 
may only have access to one insurer or access to a plan with 
limited networks?
    Mr. WHITE. Yes, sir. What we are expecting, according to a 
Kaiser analysis, is about 650 counties, maybe more, with only 
one plan. One plan is not a choice of plans, and so that is 
very concerning. As competition decreases, we see premium rates 
increase.
    Mr. JOHNSON. Is that getting better or worse?
    Mr. WHITE. Excuse me, sir?
    Mr. JOHNSON. Is it getting better or worse?
    Mr. WHITE. That is a worsening development. We are seeing 
these counties with one plans emerge, largely in rural areas, 
and is not good for consumers. It is not good for competition. 
It is its not good ultimately for costs for subsidies, and for 
the U.S. Treasury.
    Mr. JOHNSON. Thank you, sir.
    Chairman BRADY. Thank you. Mr. Rangel, you are recognized.
    Mr. RANGEL. Thank you so much, Mr. Chairman, and thank you 
for calling this hearing.
    I was wondering why we were having this, but then I 
recognize we are about to have our national conventions, and so 
I assume this is to sharpen up our skills for the convention.
    First of all, if there is a problem with the Affordable 
Care Act as it relates to premiums, it would just seem to me, 
it would make a lot of sense to have the administration here to 
explain why we have this problem, but since you saw to select 
three witnesses that are not a part of the administration, 
let's find out who they are.
    Now, Mr. White, you used to work for the leadership in the 
Senate, the Republican leadership doing what? Mr. White, did 
you work for the House, the Senate or----
    Mr. WHITE. I worked for this committee for 6 years, sir.
    Mr. RANGEL. Under whose--what committee?
    Mr. WHITE. The Ways and Means Committee.
    Mr. RANGEL. Who was the chairman?
    Mr. WHITE. Chairman Bill Thomas, from 2001 to 2007.
    Mr. RANGEL. Okay. Now, what did you do before you came to 
work for the Ways and Means Committee?
    Mr. WHITE. Before that, I worked for 2 years with 
Congressman Jim Greenwood from Pennsylvania, and before that, I 
worked for Congressman Chris Shays for 4 years from 
Connecticut.
    Mr. RANGEL. All Republicans, right?
    Mr. WHITE. All Republicans, correct.
    Mr. RANGEL. Okay. Now, you are in charge of a--president 
and counsel for Affordable Health Coverage?
    Mr. WHITE. Yes, sir.
    Mr. RANGEL. Is that a for-profit organization?
    Mr. WHITE. It is a nonprofit 501(c)(6).
    Mr. RANGEL. And how long did it take before you left the 
Congress that you head up this organization?
    Mr. WHITE. I left in January of 2007, and I became 
president of CAHC in December of 2008, so that was----
    Mr. RANGEL. So it wasn't you went from the Congress to this 
organization.
    Mr. WHITE. Right.
    Mr. RANGEL. Now, Mr. Condeluci, is your outfit a for-profit 
or not-for-profit?
    Mr. CONDELUCI. I run my own practice, sir, which is a for-
profit legal and policy practice.
    Mr. RANGEL. What did you do before you ran this outfit?
    Mr. CONDELUCI. Prior to that, I was an attorney with a law 
firm, and prior to that, I was counsel to the Senate Finance 
Committee. Prior to that----
    Mr. RANGEL. How long were you with the Senate Finance 
Committee?
    Mr. CONDELUCI. April of 2007 to September of 2010.
    Mr. RANGEL. Who was the chairman?
    Mr. CONDELUCI. Chairman Baucus was--or Max Baucus was the 
chairman at the time. I was on the Republican professional 
staff, and at the time, Senator Grassley was the Ranking 
Member.
    Mr. RANGEL. So okay. You worked for Republicans. How long 
was it before you left the Congress that you joined the PLLC in 
Washington?
    Mr. CONDELUCI. When I left the committee in September 2010, 
I went back to the law firm to practice law.
    Mr. RANGEL. How long was it before you went from the time I 
am talking about leaving the Congress and----
    Mr. CONDELUCI. I started my CC Law & Policy practice in----
    Mr. RANGEL. How long was it?
    Mr. CONDELUCI [continuing]. September of 2014, so 6 years.
    Mr. RANGEL. Thank you. Mr. Harte, you were president of 
some National Association of Health Underwriters.
    Mr. HARTE. That is correct.
    Mr. RANGEL. Is that insurance agents?
    Mr. HARTE. Yes.
    Mr. RANGEL. Brokers?
    Mr. HARTE. Yes.
    Mr. RANGEL. So you represent the insurance business, right?
    Mr. HARTE. We like to say that we represent the American 
consumer for health insurance, but our membership is 
predominantly agents, brokers, and consultants who represent 
corporations.
    Mr. RANGEL. But you were lauded for what you were doing for 
the brokers and insurance company when you got elected, right? 
I mean, for----
    Mr. HARTE. I believe I received recognition for addressing 
the escalating cost of health care. That is what I am known for 
is dealing with health insurance premiums.
    Mr. RANGEL. Well, anyway, with all due respect to you 
gentlemen, I really don't see how we can get to the core of the 
problem we face as a Congress and as a Nation.
    Mr. Chairman, it would seem to me that these are qualified 
people respecting their constituency, but our constituency are 
not insurance agencies, they are not employers, it is the 
people that are trying to gain access to health care. If for 
any reason we find higher premiums than we expected, I really 
don't expect these gentlemen to have the answers to the 
problems.
    The answer has to be with who made the mistakes and how can 
we correct it, and it would seem to me it is done by law and 
not by those people that are engaged in for-profit for good 
reason and mature-ish reasons, efforts. So I am ready for 
Philadelphia, I hope you are ready for Cleveland, but I just 
don't see what relationship this hearing has for improving the 
quality of care for American citizens. Thank you. I yield back 
whatever balance of the time I have remaining.
    Chairman BRADY. Thank you for establishing the credentials 
of our witnesses, and God forbid we hear from real people about 
real problems in health care because they are serious ones.
    Mr. Tiberi, you are recognized.
    Mr. TIBERI. Thank you, Mr. Chairman. And thank you for 
having this hearing today. You know, if I am back home 
watching, I can't imagine what our constituents think.
    It would have taken us back to when we were the majority 
and then in the minority, and you all passed the Affordable 
Care Act, I sat down there, and we talked about those 40 to 50 
million people who didn't have health care, we talked about the 
fact that they access the most expensive coverage by walking 
into an emergency room, and that the Affordable Care Act was 
going to help them. We also talked about, or the President 
talked about if you like what you have you can keep it, okay. 
And I sometimes get frustrated because I know in my heart that 
when the Affordable Care Act was passed, it was done with good 
intentions. I really believe that.
    But I also know and have seen that a lot of Americans 
actually like the health care they have--they had and now 
don't, and we simply have a difficult time communicating with 
each other to recognize the challenges of what the new law 
created to try to help the 40 to 50 million people who didn't 
have health care.
    The irony is, as chairman of the health subcommittee in 
visiting hospitals in is my district, there are still people 
who are accessing the emergency room as their primary care, 
which is the most expensive care.
    We have a building boom of emergency room departments 
freestanding in America today, which is a whole other 
discussion. But I want to associate myself with the chairman's 
remarks because real people are experiencing problems in their 
health care who didn't have problems before. You have created 
new problems because of the health care bill, all maybe 
unintentionally, by the way.
    Let me tell you about Mr. and Mrs. Dean Wagner of 
Westerville, Ohio. They worked their entire lives. They both 
retired, and since the Affordable Care Act has passed, they 
have experienced 75 percent--75 percent increase in premiums, 
75 percent. Ms. Dianne Smothers in Johnstown, Ohio sacrificed 
higher premiums in order to keep the doctor she wanted to keep, 
and then she finds out that her doctor was suddenly canceled 
with no warning when a coop in my district, and now a majority 
of coops have failed, coops created by the Affordable Care Act. 
When that coop failed, she and her husband's out-of-pocket 
expenses were $16,500 more than they had ever been before the 
Affordable Care Act had passed. These are regular middle class 
folks.
    Unfortunately, for the Wagners and the Smothers, they are 
not the only constituents that I have talked to who have 
contacted my office that are facing outrageous premium 
increases, outrageous out-of-pocket expenses like they have 
never experienced before, and now going to a doctor that they 
didn't want to go to because they can't go to the doctor they 
had, which they were promised over and over again.
    Mr. White and Mr. Condeluci, I wanted to ask you about a 
specific failure of the ACA that has been reported widely now. 
The coop program. I was here when that was discussed, and it 
was a nod to the public option for some Democrats who wanted 
the public option. I believe 8 of the 23 that began remain, and 
one of those, as I said, was InHealth that failed in Ohio. 
22,000 lives were covered, and these people were left 
devastated.
    So instead what was supposed to happen with these coops was 
to create competition. It seems that the coops badly mispriced 
premiums, artificially creating a lower market, underpricing 
the market, and in doing so artificially, did it hold down 
premiums initially? Meaning, you know, there was a lot of 
ballyhoo about premiums didn't go up immediately. Is that 
because the coops provided this artificial floor?
    Mr. WHITE. I will take the first shot at this, I guess.
    So according to the Government Accountability Office, they 
did a report, they looked at the premium rates and basically 
said that in about half the rating areas the premium rates were 
substantially below market rates. So they were coming in with a 
below market rate. Of course, they had significant taxpayer 
support in establishing the coops and getting off the ground, 
but were trying to attract enrollment through those lower 
premium rates.
    And I think what happened was the premium rate, the 
experience, cost experience, quickly outpaced the premiums that 
they were charging, and the vast majority of the coops, as you 
know, have since failed. And the insurers that remain in the 
markets had to pick up and cover those folks who lost their 
coverage through the coops. Significant problem in Ohio, Iowa, 
other areas, as the committee knows.
    Chairman BRADY. Thank you. Dr. McDermott, you are 
recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. I always love to 
come to these propaganda hearings before the elections, and it 
is obvious we are trying to hold the insurance companies 
harmless here. Premiums go up because of the Affordable Care 
Act, that is why they go up.
    But I lived for 45 years with a father who was an insurance 
underwriter, so I know a little bit about what goes on.
    Mr. MCDERMOTT. And if you look at why the premiums go up, 
it is either because the company misjudged and made a bad rate 
to charge people or the costs of the medical profession have 
gone up uncontrollably.
    Mr. Lee, what percentage of those two things do you think 
is bringing the premiums up? Is it misjudgment by the insurance 
companies or is it that medicine is jacking up the costs?
    Mr. LEE. I think it varies by locale. I think in much of 
the country, it is because the plans, whether co-ops or for-
profit or nonprofit plans, got their risk mix wrong, and they 
underpriced and are now jacking it up to catch up on the real 
costs.
    But underlying this, and we have heard this from all the 
witnesses, the driver of healthcare costs is the underlying 
cost of what it costs to deliver health care to Americans. And 
that is one of things I think the Affordable Care Act provides 
some tools for, but we need to be focusing on.
    In California, we have not seen consumers whipsawed by big 
price changes. They have been pretty constant. But costs are 
still going up and we need to address those with tools of 
transparency and others.
    Mr. MCDERMOTT. Let me take an example, because we hear a 
lot of examples given up here. They give these horror stories 
of Mr. Johnson or Mrs. Williams or whatever and her problem.
    Let's take Texas. Now, if you were an insurance company in 
Texas and you were trying to set the rates for Texas, and you 
had 1,314,000 people uncovered by insurance in your market who 
have access to the emergency rooms, and they go in, they get 
sick, and they get taken care of and their costs are unpaid for 
by any insurance company, how does an insurance company factor 
in that number of people? I mean, the Governor of Texas said: I 
don't care about those people. I am not going to take Medicaid 
for them. They are floating around in Texas.
    How does the insurance company take that into account?
    Mr. LEE. Again, how insurance companies I believe take that 
into account is by what they are going to get charged by 
providers. And what happens with uncompensated care is 
hospitals or doctors make it up on the other side. So those 
costs for the uncompensated care is right now being paid in 
Texas by employers, by individuals, et cetera, where those 
costs are being spread.
    Where you have expanded coverage, like in California and 
the 35 other States or more that have expanded Medicaid, is 
every American is benefiting by having coverage, because you 
aren't then having the cost shift, which it is called, of 
everyone, employer-based, people, individuals, picking up the 
costs of the uncovered, which hospitals pass that through to 
the health insurance companies and their rates.
    Chairman BRADY. Mr. Lee, you might be confused. Dr. 
McDermott asked about those who would be covered by Medicaid. 
They aren't in the exchanges. Why would an insurer plug that in 
if they are covered by Medicaid?
    Mr. MCDERMOTT. Reclaiming my time, Mr. Chairman.
    Mr. LEE. My point is, as I was understanding the example of 
Texas of a million people that do not have coverage, when they 
show up at an ER at a hospital, they are uncompensated care, 
and that cost is passed on to insurance companies or employer-
based coverage, et cetera.
    Chairman BRADY. But you agree those who aren't covered on 
Medicaid are not in the exchanges, they are not factored in.
    Mr. LEE. Absolutely right. Absolutely right. That is what I 
understood the question to be. Did I get the question wrong?
    Chairman BRADY. We will give you some more time, Dr. 
McDermott.
    Mr. MCDERMOTT. I think the chairman has really put a sharp 
point on it. The Governor of Texas decided he didn't want 
health care coverage for 1.2 million or 1,314,000 people. So 
they still get sick, and their costs are factored into the 
system, and the insurance company jacks up the prices to cover 
for what isn't paid for in other places.
    Chairman BRADY. That is not accurate, Dr. McDermott.
    Mr. MCDERMOTT. I mean, hospitals do that. They add a couple 
of dollars on the room rate to cover for their unaccounted 
costs.
    Now, I have another question, though. We have in the Part 
D, we had risk corridors to control the costs for the drug 
companies or the people who were putting out the drug coverage. 
We had it also in the ACA. In the Part D, it is still working. 
In Part A they have cut it out. It seems to me that we have 
undermined the ACA by cutting out that money in those risk 
corridors.
    I yield back the balance of my time.
    Chairman BRADY. I just want to clarify, those who are in 
Medicaid are not in the exchanges, they are not factored in the 
insurance premiums. Now, the more than a million Texans who 
decided to pay the tax rather than go to a plan they don't want 
and can't afford, that is another story.
    Mr. LEVIN. Can he answer that since you took the time?
    Chairman BRADY. Sure. Are those who are covered in Medicaid 
factored into the insurance exchanges?
    Mr. LEVIN. Of course they are factored in.
    Mr. LEE. The cost of uninsured are basically borne by 
everyone, both in marketplaces and in employer-based coverage, 
because the hospitals pick up those costs and others can----
    Chairman BRADY. We are not taking about employer-based. We 
are talking about the exchanges and the insurance premiums. 
They are not covered in that package? Are they reflected in the 
Medicaid rates?
    Mr. LEE. The uninsured that have uncompensated care, 
hospitals, other providers, build that into their rates that 
are charged to people in marketplaces or in employer-based 
care, and that is a factor in terms of raising costs.
    Chairman BRADY. You are confusing the Medicaid populations 
with the insurance agents.
    Mr. LEVIN. No, he is not. You are the one who is confused, 
Mr. Chairman.
    Chairman BRADY. Mr. Reichert, you are recognized.
    Mr. REICHERT. Thank you, Mr. Chairman.
    So let's deal in some facts. ObamaCare has proven time and 
time that promises made were not kept. The President promised 
affordability, yet the law continues to drive up premiums and 
deductible costs.
    We need to look no further than my home State for evidence. 
Insurers in Washington have requested an average of 13.5 
percent increase. That is for individual plans for next year, 
with at least one insurer requesting increases of almost 20 
percent.
    The President promised Americans that if they liked their 
plan they could keep it, if they liked their doctor they could 
keep their doctor. Well, that turned out not to be true.
    And I was in a meeting 6 years ago, as were a lot of the 
Republicans, when the President was asked to come and speak to 
us, and he was asked the question: Can you keep your health 
plan? Can you keep your doctor? And he said: Well, you know, 
there might have been some language snuck into the bill that 
runs contrary to that promise. The President said that.
    Premera Blue Cross and LifeWise Health Plan of Washington, 
a subsidiary of Premera, announced that they will completely 
withdraw from Washington Health Benefit Exchange in 12 counties 
in Washington State. The result is thousands of my constituents 
will lose their health plan and be forced into another whether 
they like it or not or they will be taxed for failing to sign 
up for a healthcare plan.
    So my question is for Mr. White. What do you think is 
causing insurers to exit the market? And how do you think that 
will impact the choice and access to care for constituents like 
mine, especially in rural communities?
    Mr. WHITE. I think your experience is not unlike other 
State experiences in terms of the double-digit premium 
increases and the exit of certain insurers from the 
marketplace. I think the insurers are leaving the marketplaces 
because they are losing money. And probably the most prominent 
example of that is United Health Group. But there are other 
insurers in the marketplace who are looking at various 
geographic-based markets and saying: We can't afford to stay 
there.
    Now, Congressman McDermott made the comparison to Part D 
and having risk corridors and risk adjustment and reinsurance, 
and I would note, in the Part D market, where the model is 
based on a competitive model, there are 800 or so plans 
available nationwide. In the average marketplace you have 
approximately a choice of about 34 plans. The ACA experience is 
opposite that. It is marked by fewer plan choices, plans 
exiting markets, and premiums that are not stable but are going 
up significantly.
    Mr. REICHERT. So you said there were 600 counties in the 
country that will be down to one choice?
    Mr. WHITE. According to a Kaiser Family Foundation 
analysis.
    Mr. REICHERT. Three of those will be in the district that I 
represent. What is the answer to----
    Mr. WHITE. Well, it raises interesting questions, right? 
Like the subsidy is supposed to be tied to the second-lowest-
cost Silver plan under the law. And if there is only one plan, 
what is that second-lowest-cost option? The other thing is that 
having a choice of one is no real choice at all, right?
    So in my opinion, flexing up the market, allowing some 
competition in the exchanges, and perhaps allowing consumers to 
take their subsidy, make it portable, and allow them to leave 
the ACA exchanges to buy a plan off exchange, I think Chairman 
Brady has called this concept like a subsidy backpack, but 
being able to carry that outside to really use that subsidy and 
that assistance off the exchange we think is a very important 
reform that would generate competition and hopefully encourage 
more insurers to get back in the market.
    Mr. REICHERT. Current law doesn't allow that to happen.
    Mr. WHITE. Current law does not allow the subsidy to be 
used off exchange. There is some flexibility----
    Mr. REICHERT. I am sorry. The ACA, then, is in violation of 
its own law which requires that you have at least two choices. 
Is that what I heard you say?
    Mr. WHITE. I would defer to maybe Chris or, you know, a 
legal opinion on that. But it creates some interesting 
questions, let's say, in the various marketplaces.
    Mr. CONDELUCI. Sir, in the exchanges, if a carrier is 
participating, the statute does require the carrier to offer a 
Silver-level plan, as well as a Gold-level plan. So that is 
just a requirement that a carrier wanting to participate in the 
exchange has to meet.
    But when it comes to other carriers being a part of that 
market, there is not that similar requirement. Carrier Chris 
might say: Hey, I am fine, I will offer a Silver and a Gold. 
Carrier Joel might go: You know what? I don't want to enter the 
market for a myriad of reasons.
    So that, I hope, is an explanation of that.
    Mr. REICHERT. All right. Thank you. I yield back.
    Chairman BRADY. Thank you.
    Mr. Lewis, you are recognized.
    Mr. LEWIS. Thank you very much, Mr. Chairman.
    Mr. Lee, 20 million people have been covered by the 
Affordable Care Act and we have a historically low number of 
uninsured Americans. How does reducing the number of uninsured 
impact premiums in the employer-sponsored insurance market?
    Mr. LEE. The relationship there is that providers, in 
particular hospitals, will take uncompensated care and build 
that into the rates they charge individuals or people that have 
employer-based coverage. And so that raises the cost of 
insurance, whether it is in an individual market or in 
employer-based coverage. So the expansion of coverage that we 
have seen through both exchange coverage and through the 
Medicaid expansion has been a factor in lowering what premiums 
would have been otherwise.
    Mr. LEWIS. Mr. Lee, could you tell us what is the impact of 
competition on insurance rates in your State, the State of 
California?
    Mr. LEE. Yeah. We think competition is vitally important. I 
think everyone up here on this panel would agree with that, is 
that for the 90 percent of Americans that have three plans or 
more to choose from--and in California it is far more than 90 
percent--plan competition is what drives premiums. The plans 
know that consumers want the lowest price plan, and they will 
shop for that. And that is the main driver of keeping costs 
down.
    And so I think everything we can do to foster a competitive 
marketplace and to give consumers an ability to make informed 
decisions between plans is vital. In California, we have had 
both of those. We have had a vibrant competition across the 
vast majority of the State. And consumers know when they are 
choosing plan A versus plan B it is not because of some quirk 
on deductibles. It is because of a different network. So they 
know what they are buying. We think that has contributed to our 
good risk mix.
    Mr. LEWIS. Mr. Lee, in my district, in the city of Atlanta, 
HIV infection rates are very concerning. From your testimony, 
it seemed that you have experience in reducing healthcare and 
insurance costs to consumers. What action or policies can make 
it easier for people, especially those living with HIV and 
AIDS, to access and afford the medication they need?
    Mr. LEE. Well, I think one of the most important things the 
Affordable Care Act has done is change the rules of the game 
for insurance companies to not be about avoiding sick people, 
but now getting people who are sick the care they need when 
they need it.
    Part of what we have done in California is have in our 
patient-centered benefit designs limits on cost of high-cost 
specialty drugs, which are a major concern into the drive in 
expense, but we want people that have to get specialty drugs to 
not have their copay be a barrier between them and getting 
those drugs.
    So we both require for people with HIV a mix of drugs at 
lower formulary tiers, but also for the most expensive drugs, 
that may cost $60,000 a year, that a consumer would only have 
$250 a month they would need to spend for their share of the 
costs.
    And this is part of the balancing act we need to wrestle 
with as a Nation, is we need to be addressing the rising costs 
of pharmaceuticals, the rising cost of specialty drugs. But 
let's not do that in ways that don't give lifesaving drugs to 
consumers because of their high cost. And that is a balancing 
act we have struck in our patient-centered designs in 
California.
    Mr. LEWIS. And, Mr. Lee, I for one want to thank you for 
all of your great and good work, and for your vision in helping 
to provide health care, not just for the people of California, 
but for the people of our Nation.
    I yield back, Mr. Chairman.
    Chairman BRADY. Thank you.
    Dr. Boustany, you are recognized.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    Mr. White, I am going to step back and ask some very, very 
basic questions. Do you believe we have a functioning market in 
health care today? Is it a functional market?
    Mr. WHITE. I believe there are a lot of warts in the 
market. It functions for some people and I think it doesn't 
work for a lot----
    Mr. BOUSTANY. Okay. So it is a poorly functioning market.
    Mr. WHITE. Poorly functioning would be the phrase I would 
use.
    Mr. BOUSTANY. Poorly functioning market.
    I noted that the President just within the last 24 hours, I 
believe, admitted that it is a poorly functioning market as a 
result of this law, ObamaCare, when he called for a renewed 
effort to put forth a public option and to raise subsidies. I 
think that is a pretty tacit admission that the market is 
failing. Is that correct?
    Mr. WHITE. I think it highlights some of those warts. And I 
think other people have suggested that we need to expand cost-
sharing subsidies to fill in these very large cost-sharing 
requirements on the exchanges. And that also is a recognition 
that these things are growing like crazy.
    Mr. BOUSTANY. And just a moment ago you referenced the fact 
that we are seeing significant consolidation in the insurance 
marketplace, which means fewer choices, correct?
    Mr. WHITE. It may mean fewer choices. It may not. So what 
we are seeing in the exchanges right now is there are choices 
of plans available in most markets. I think the average is 
somewhere around six or seven. It may be different in 
California.
    So there are still choices. What I am suggesting is that 
there is consolidation on both the insurer side and the 
provider side----
    Mr. BOUSTANY. Correct.
    Mr. WHITE [continuing]. And that those raise trend on 
medical costs questions in different directions.
    Mr. BOUSTANY. Exactly. And if you have a functioning 
market, there are certain characteristics that are required--
information, transparency about provider quality, about cost, 
about insurance coverage. I see contraction in what is going on 
there as a result of fewer choices, less information. We still 
don't have the kind of information we need to really have a 
good functioning market, both on the provider side and on the 
insurance side.
    And then information choice and control ultimately. 
Shouldn't the consumer decide and have the information to be 
able to make decisions to have a really truly functioning 
market?
    Mr. WHITE. Yeah. I think information is the lifeblood of a 
functioning marketplace. We don't see those on exchanges today. 
In December of 2015, we did a report card on exchanges and 
graded the exchanges from A to F. We looked at all the State 
exchanges in healthcare.gov, and healthcare.gov was solidly at 
a C level, which hopefully they will improve next year. But 
they are not providing basic information on is the provider in 
the network, is the drug on the formulary, how much is the 
patient facing out of pocket for that formulary drug, is there 
is a smart plan sorting tool, et cetera, et cetera, et cetera.
    So we need better information on the exchanges. For 
example, with these very high deductibles, can we say the plan 
is HSA qualified or not. We need better information on the 
providers as well. Are they high quality? Are they efficient? 
Can I pay lower costs if I go to provider Chris versus provider 
Boustany.
    Mr. BOUSTANY. So the trend lines in all these areas are 
very disturbing, in my mind, as a physician who has been around 
health care for quite a long time. And if you agree that 
coverage, for whatever it is worth or whatever it is, is the 
gateway to the service, high-quality health care, and I think 
the focus needs to be on quality, then we have a poorly 
functioning market that is rapidly failing. And I think the 
President's admission just in the last 24 hours sort of 
verifies that in my mind.
    We have to take substantive steps to change this. Less 
choice, less information, less control. This is disastrous for 
health care. I think it is truly pathetic. I am really upset. I 
am angry about what is happening to my beloved profession, 
medicine. And at the same time, as a patient, the husband of a 
patient, the father of patients, I am really worried about what 
this is doing.
    And we are seeing the costs going up. And of course what 
the President is proposing is higher taxpayer liability on top 
of this, on type of higher premiums, higher copays, out-of-
pocket expenses.
    We are going in the wrong direction. This is a failure. And 
we better recognize it as such and take steps.
    Mr. WHITE. I agree, Congressman. We have presented 13 
different policy options in our testimony to you today. We want 
to work with both sides of the aisle to see if we can make some 
improvements here, because the market is not working the way it 
should.
    Mr. BOUSTANY. Thank you. I yield back.
    Chairman BRADY. Thank you.
    Mr. Neal, you are recognized.
    Mr. NEAL. Thank you, Mr. Chairman.
    Just quickly a response to my friend, Dr. Boustany. I think 
there is general agreement from all the panelists here that 
conventional economics don't work when applied to health care. 
People age, people get sick, and sometimes they get sick in a 
catastrophic manner, and the rest of the system, in terms of 
implied shared risk, is what is supposed to absorb some of 
those costs. That is the whole notion of the ACA.
    And I think that one of things that is left out 
conveniently in the argument is the ACA was really a compromise 
in the sense that you were going to try to keep the private 
sector alive to discipline price. That was the idea. And I 
think just to discuss that with the suggestion that somehow 
that it is a poorly functioning market, how would we have 
described it before the ACA? An efficiently functioning market?
    I mean, the reason that we have Medicare and Medicaid is 
because conventional economics don't apply to health care. 
People simply get old and they get sicker as they get older. 
That is part of the challenge that we face.
    But in any event, Mr. Lee, when Massachusetts implemented 
our State-level healthcare reform plan, or as we fondly called 
it those days, RomneyCare, we recognized that that consumer 
education and outreach were key to the success of the program. 
Community assistance programs made this work. It was not just 
getting consumers in the door, but having them find value in 
the insurance product and to use the healthcare system in a 
new, thoughtful way.
    The State partnered with the Red Sox, as one example, to 
educate residents about the new law and to entice them into 
enrollment. Then the State partnered with issuers and local 
organizations to educate newly covered individuals about how to 
use coverage and access services with the new plan for 
insurance.
    Just before you talk about how California has done this, 
Mr. Lee, in terms of educating its citizens, in Massachusetts 
it really was Governor Romney, the whole notion of the Heritage 
Foundation's mandate. I mean, David John's picture is at the 
end of that photograph. Governor Romney signs the legislation. 
Ted Kennedy is standing behind him. But it was the business 
community in Massachusetts that put the plan together with 
Governor Romney.
    So perhaps in the 2\1/2\ minutes you have in response to my 
question, Mr. Lee, could you talk about what California has 
done to educate citizens about these opportunities?
    Mr. LEE. Thank you very much. I just do need to underscore 
your initial comment, if I may, about the prior market failures 
in health care. Because before the Affordable Care Act, 
remember, the individual market was one where insurance 
companies could and did turn people away regularly. And once 
you were in, you couldn't shop and choose. It is absolutely an 
imperfect market today, but I think it is a vastly improved one 
that needs to be built upon.
    And California did a lot of learning from Massachusetts, 
actually, and I think we learned from other States, we learned 
from the Federal marketplace. We are seeing across the Nation 
efforts to make sure we get everyone enrolled.
    And a couple of examples I would give are, first, in 
California there are more than 500 storefronts, huge stores 
with our logo, Covered California, on it. Those aren't State 
stores. Those are stores run by insurance agents who are 
members of CAHU, I mean the California Association of Health 
Underwriters. These are individual small-business people who 
are members of their community saying: We want to use this 
platform to sell insurance, to make insurance available.
    Because it is about not just signing people up for 
insurance. It is then helping them understand how to use it. 
And I think that question is spot on, because what we have seen 
from many of the people coming into exchanges across the Nation 
is getting in is only the first step.
    And this is why we in California believe patient-centered 
designs are so important. If you have not had insurance before 
or you are a young healthy guy and you show up at the doctor 
and say, ``Sorry, you have got $3,000 you have got to spend 
before you get this as a covered benefit,'' are you going to 
leave coverage? Absolutely.
    Patient-centered design is part of the education to say, 
when you get sick, you go see a primary care doc, it is a 
covered benefit right out of the gate. And that is part of the 
reason we have patient-centered designs, because we think 
educating people about how to use insurance is also having an 
insurance design that works for all consumers.
    Mr. NEAL. Thank you, Mr. Lee.
    Thank you, Mr. Chairman.
    Chairman BRADY. Thank you.
    Mr. Roskam, you are recognized.
    Mr. ROSKAM. Thank you, Mr. Chairman.
    A quick word about today, a quick look back, and then a 
question.
    Mr. McDermott suggested that this is a hearing today about 
holding the insurance companies harmless. That hearing was last 
week when the administration came before the Oversight 
Subcommittee and essentially was arguing for subsidies through 
the Cost Sharing Reduction Program for the insurance companies. 
So the administration was here advocating for insurance 
subsidies last week.
    A word about maybe why we don't need to hear from the 
administration on every problem and that we can hear from four 
fresh voices is this. Last week at the same subcommittee 
meeting on Thursday, we heard from the administration. Mr. 
Mazur, the Treasury assistant secretary for tax policy, said 
this about a very controversial thing that they are doing. He 
said this: If Congress doesn't want the money appropriated, 
they could pass a law that specifically says don't appropriate 
the money from that account.
    So that is the wisdom and constitutional insight. Of course 
that runs completely counter to the explicit language of the 
Constitution that says: ``No money shall be drawn from the 
Treasury but in consequence of appropriations made by law.''
    So, look, the administration has a very big microphone, and 
they can fend for themselves.
    A quick look back. 2008, the country had made up its mind, 
I think, after President Obama was elected, around two things 
as it relates to health care. The first was that health care 
was too expensive. And the second thing, we were scandalized, 
basically, as a country with the fact that preexisting 
conditions precluded people from having access to an insurance 
pool. That, I think, was the opportunity. That is where the 
national consensus was, to move forward on that basis. I think 
it would have been the smart move all the way around. And I 
think the nature of the discussion that we would be having to 
day would be fundamentally different.
    But the administration made a different decision. It is 
their prerogative. But they decided to go basically all in on 
the Affordable Care Act. And that is where the problem 
happened.
    Now, this business never works when an expectation is 
created here and the result is here. So the chaffing, the level 
of anxiety, and the feeling that people have right now is like: 
Oh, no, no, everyone said this was going to be great. So when 
Mr. Lewis is talking, for example, about HIV problems in the 
inner city of Atlanta, no, it was basically ObamaCare was the 
remedy, this was all going to be great.
    And I think, Mr. Lee, part of the challenge now is you 
talked about something like a culture of coverage. Even a 
culture of coverage is a suggestion that somehow this gets 
better the longer we wait. So I am not encouraged by that.
    And I want to get to the coverage question. I actually have 
a question for Mr. Harte. So there is an illusion here, and I 
think the illusion is that coverage is the goal. Well, coverage 
is simply: I will do this. You can get a library card that 
says: Here is a library care. But you walk in to try and check 
books out of the library and there is no books.
    Can you speak to this notion of coverage versus access and 
give us some word about how we should be evaluating the concept 
of coverage as opposed to actual access to health care? Mr. 
Harte, do you have an insight on that?
    Mr. HARTE. Absolutely. You will all define access 
completely differently. Some of you may say access is about 
being able to have access to a health insurance plan. And as 
Mr. White has indicated, in several States we have lost a lot 
of health insurance companies and co-ops are failing. So a lot 
of your constituents across the country are losing access to 
those plans.
    Some may also say: I don't have access to my doctor, for 
many reasons. Number one, maybe it is just too expensive, maybe 
access to an MRI, they simply can't afford it, or, as we have 
talked about earlier, these bifurcated networks.
    So I live in New Hampshire and all of the health insurance 
plans on the marketplace are limited networks. All of my health 
care is being done in Boston. All of my surgical procedures are 
done at Mass General or Brigham and Women's. I do not have 
access to care in Boston under a marketplace plan. And that is 
a huge problem if you want to cross the border and get into 
Massachusetts or, quite frankly, in any other state where you 
may want to have access to better care.
    So in answer to your question, access to health insurance 
plans is a huge challenge. Access to affordable plans, access 
to affordable health care, and access to your own doctor is a 
continued problem in the post-ACA world.
    Chairman BRADY. Thank you.
    Mr. Doggett, you are recognized.
    Mr. DOGGETT. Thank you so much, Mr. Chairman.
    And to each of our witnesses, I believe that there are many 
factors contributing to these hikes and surges in health 
insurance premiums, and one of the major factors is the failure 
of this House and this Congress to do anything but engage in 
obstructionist tactics concerning the Affordable Care Act.
    Whenever there is the discussion of the slightest 
improvement--how can we make the Affordable Care Act work more 
efficiently, how can we make it more fair, how can it be 
better--there is nothing but repeal, repeal, repeal. And that 
has some effect on the administration, because instead of 
noting an area where there is a shortcoming and a need for 
legislative action, the administration is placed on a defensive 
posture with now over 60 attempts to repeal.
    And of course the original cry in this committee when it 
acted back in January of the new Congress coming into effect 
was that it would repeal and replace. But it never offered any 
replacement in a meaningful way to address these needs. So that 
failure, that obstructionism certainly has an impact on 
premiums.
    The second aspect of this that has already been referred to 
that I have seen personally is the impact of the indifference 
of the State of Texas and a number of other States to the needs 
of its poorest citizens; in all, 1.3 million Texans. And this 
indifference and this refusal to take 100 cents on a Federal 
dollar to pay for the expansion of healthcare coverage has been 
a subject that has been raised by business leaders, by 
hospitals, by elected officials, all saying how important it is 
to achieve the full promise of the Affordable Care Act by 
including those citizens who would be covered through Medicaid.
    I have looked personally in the eyes of families who have 
come in San Antonio in order to sign up for the Affordable Care 
Act and to have to tell them: I am sorry, you are too poor to 
achieve access to the Affordable Care Act. You cannot sign up 
in the exchange. Your remedy is through Medicaid, which they 
have been denied.
    And anyone who thinks that denying health insurance 
coverage in the hope of getting for the first time a family 
doctor to these families means that they do not have an impact 
on health insurance premiums is ignoring reality. Yes, 
actually, in many cases these folks do not receive the 
healthcare coverage they need. And so eventually, when things 
get so bad, they are forced into the emergency room.
    We had estimates before the Affordable Care Act that the 
impact of the unpaid-for care of the poor was hiking insurance 
premiums for the family that has an insurance policy by over 
$1,000 a family. That has an impact for employer-provided care, 
but it absolutely has an impact on the premiums being paid 
through the exchanges. They are not excluded from the impact of 
the cost of covering the uninsured poor people, many of whom I 
have seen personally denied the opportunity we thought would be 
forthcoming, and paying for it both in pain and in the cost to 
health insurance premiums.
    There is another factor, Mr. Lee, we haven't touched on 
that I think is really significant, you refer to it in your 
testimony, and that is the impact of pharmaceutical prices and 
price gouging by pharmaceutical manufacturers. This committee, 
just as with improvements to the Affordable Care Act, has 
refused to even conduct a hearing about this problem and it has 
been ignored.
    You referred to the discussion of Express Scripts on the 
impact on specialty drugs. But they have also reported that in 
2015 alone, that increases in the average price of brand name 
drugs were at about 16.2 percent. That is consistent with other 
reports of organizations, like Kaiser Family Foundation, that 
prescription drug costs now amount to 19 percent of health 
spending by employer health insurance plans. On brand name 
drugs, we don't have the transparency or the competition that 
you have suggested is a problem with some health insurance 
markets.
    Do you believe, Mr. Lee, that pharmaceutical prices are 
contributing to premium increases and that more transparency 
and competition here would help us address premium increases?
    Mr. LEE. There is absolutely no doubt that a significant 
factor in California and across the Nation of rising healthcare 
costs have been pharmaceutical costs increasing at a far higher 
rate than underlying medical trend, in particular, the cost of 
specialty drugs, which in 2015 rose by about 18 percent. But we 
are seeing this in our discussion with our health plans in 
California. They are highlighting the fact that those costs are 
a major driver. And for many consumers, it is a very opaque 
market. Transparency would be a huge boon for consumers.
    Mr. DOGGETT. Thank you.
    Chairman BRADY. Thank you.
    Dr. Price, you are recognized.
    Mr. PRICE. Thank you, Mr. Chairman.
    Look, let's be clear. The reason that we are here today is 
not because of all these wonderful stories that the other side 
tells. The reason that we are here today is because the 
American people are hurting because of the healthcare program 
that the Federal Government put in place.
    Twenty-six percent of the American people say they have 
been harmed by this law. If we had any other law where one out 
of every four Americans said they had been harmed by it, we 
would be having hearing after hearing after hearing and bill 
after bill after bill to fix it. Four out of 10 Americans say 
that they have a positive view of this law. That means 6 out of 
10 say: No, help us.
    Now why is that? Our job as policymakers is to figure out 
the why. And let me suggest that the why is because this law 
violates the principles that every American holds dear when it 
comes to health care. We all want a system that is accessible 
for everybody. We want a system that is affordable for 
everybody. We want a system of the highest quality. We want a 
system where patients have choices. The fact of the matter is 
that this law violates those principles, regardless of what 
your ideological stripe is.
    Mr. White, you said that the current law has made health 
care less affordable and more out of reach than before. 
Affordability, accessibility, significantly harmed.
    Mr. WHITE. Yes, sir.
    Mr. PRICE. This hearing is about increased premium costs.
    Mr. Harte, you were asked a question about what the premium 
increases were before ObamaCare, and you said that there were 
double-digit increases every single year. So what was ObamaCare 
supposed to do? What was the ACA supposed to do? Stop that, 
right? That is what the President said. Costs won't be going 
up, they will be going down.
    The fact of the matter is that the administration spent 
over $1 trillion on a broken Medicaid system and on subsidies 
that are forcing people to buy insurance that they don't want, 
raiding Medicaid for $800 billion, increasing taxes by a 
trillion dollars. And what do we have? We have double-digit 
inflation in premiums.
    And it is not just premiums. The deductibles are out of 
site. Mr. Harte, you identified that. I was stunned by your 
figures. Four hundred and eighty percent increase over the past 
9 years in deductibles, 140 percent over just the past 3 years, 
which means people have coverage, but they don't have care.
    I used to practice orthopedic surgery. My former colleagues 
call me and they are distraught because of the patients who 
come into their office, they recommend something that needs to 
be done, and the patient says: I am sorry, Doc, I can't afford 
that, my deductible is thousands of dollars. This is a system 
that is not working for the American people.
    A fellow in my district, Mickey Roberts, 59 years old. In 
2013, his premium was 500 bucks a month--500 bucks a month. Now 
it is 1,200 bucks a month. Example after example after example. 
I have a cancer survivor who can't get a screening MRI 
following her cancer because you have non-medical people making 
medical decisions. That is part of ObamaCare.
    Families harmed. Family of five in my district whose 
premiums just 3 years ago, premiums were 330 bucks a month. Now 
they are 1,365 bucks a month. I have another family whose 
premiums have increased 30 percent over the past 2 years. 
Deductible went from 6,500 to 12,500. And now their health 
insurance costs are higher than their mortgage. The highest 
cost that they have in their family budget is their health 
insurance. This is craziness.
    So what we invite our friends on the other side of the 
aisle to do is to please recognize that there are people that 
are hurting, and that they need help, which is why what we have 
tried to do is to put forward positive solutions. Our friends 
say we don't have a plan. We have put forward A Better Way, a 
better way to address the challenges that we face in all sorts 
of areas, not the least of which is health care. And in health 
care, a better way means that patients and families and doctors 
are making medical decisions and nobody else.
    Mr. Lee, you highlighted this cost shifting that you talked 
about. Cost shifting ended decades ago. There is no cost 
shifting anymore. I am a third-generation physician. The fact 
of the matter is that cost shifting doesn't exist. The 
government is setting the prices. Physicians, hospitals, they 
aren't able to pick the prices that they charge. In fact, what 
they are being paid today for Medicaid and Medicaid services 
oftentimes doesn't even cover the cost of the service being 
provided.
    This is a system that is broken, and it needs to be fixed. 
And I urge my colleagues on the other side of the aisle to join 
us in A Better Way.
    Chairman BRADY. Thank you.
    Mr. Larson, you are recognized.
    Mr. LARSON. Well, thank you, Mr. Chairman.
    And certainly I want to thank our witnesses here today, 
because I really did appreciate the comments that you made, the 
thoroughness, and a number of the good ideas that you are 
suggesting. But you, of course, know that you are part of 
theater. You are not part of getting anything done. This is all 
about messaging. It has nothing to do with solving the problems 
that the American people face.
    This matter has been taken before the public in 2010, in 
2012, in 2014, and it again will be front and center in 2016. 
Fifty-eight times or more in the Congress this act has been 
repealed by the House of Representatives. There is no 
substitute, there is no alternative, there is no score that has 
been given to any meaningful program that would address the 
issues as you have thoughtfully outlined or as California is 
diligently doing, because this is a farce, it is a play that we 
have all become a part of. Where is the solution?
    Yeah, there are a lot of things that are wrong about the 
Affordable Care Act that need correcting, and when thoughtful 
people put their minds together and are able to address these 
issues, you can make these changes. But there has been no 
serious attempt to make any change other than to message 
against this bill and its flaws, its warts and blemishes, 
instead of looking at the constructs of the bill, as Mr. Neal 
outlined, and how they can be successfully managed, as they are 
in California and as they were by the business community in 
Massachusetts, as they are being done in Connecticut.
    Instead, we are like this great ostrich with our head in 
the sand here, prevailing upon you to come before the committee 
so that we can try to convince the public that people are 
hurting out there. And they are. But this Congress isn't doing 
anything about it.
    It is no different than leaving Congress this week without 
doing anything about gun violence. It is happening all around 
us. It is happening at a devastating rate. It is happening in a 
way that we should be ashamed of ourselves. We will message on 
it, but we won't take a vote, we won't sit down and 
constructively work towards coming up with a solution for the 
American people.
    And that is what the American people are fed up with. That 
is why the American people believe that there is a wall that is 
going to be built and the Mexicans are going to pay for it. And 
that is why people believe in these promises that are never 
going to come to fruition.
    It is long overdue that we, as Americans, roll up our 
sleeves and sit down. This committee is fully capable and 
talented on both sides of this aisle of resolving these issues 
in a nanosecond by coming together and working through these 
concerns. But it is more convenient to have a message that you 
can pound home in a campaign. Very successfully done in 2010. A 
Presidential campaign was waged on it in 2012. And ever since 
2010, 2012, 2014, and now in 2016, the American people have 
been told this is a God-awful plan, but they haven't had one 
solution from the other side.
    I apologize to you for being here today, not because you 
haven't provided thoughtful information, you have, but you must 
understand by now that you are just part of theater.
    I yield back.
    Chairman BRADY. Mr. Smith, you are recognized.
    Mr. SMITH OF NEBRASKA. Thank you, Mr. Chairman.
    Thank you to our panel as well.
    Listening to all of the various comments here, it is quite 
interesting. It is frustrating. I hear some of the messaging 
from my colleague who spoke just previous to my remarks here. 
These are serious issues. I don't have to tell any of you that.
    I get frustrated when we hear that competition is alive and 
well from Mr. Lee, and that is not what I hear from my 
constituents. I hear from constituents, for example, one of 
them, one of my constituents who has lost her coverage three 
times. And they had a plan that they wished they could have 
kept, and of course they were promised they could keep it. I 
won't belabor that point too much, Mr. Lee, but that is one of 
those promises that is very frustrating.
    I know you worked for Secretary Sebelius. Is that accurate? 
And we hear various numbers of individuals who are now covered 
with insurance who didn't previously have insurance. That makes 
me wonder how accurate those numbers are when I hear from 
constituents who have lost their plans, who had a plan, 
obviously. And so maybe the constituent who lost her coverage 
three times, has she been counted three different times as 
though the plan is wildly successful because she signed up for 
three different plans on three different occasions, and not by 
her own choosing?
    But I worry that there are fewer choices for consumers out 
there rather than more choices. I worry that there is less 
competition. I worry that we have the risk corridor issue that 
is out there. The assumptions were that there would be a 
balance between plans losing money and plans making money. That 
hasn't taken place obviously. The co-ops, I mean, the Nebraska, 
Iowa CoOpportunity Health was the first co-op to collapse, 
120,000 people. I wonder how many times those people have been 
counted in these numbers we hear tossed around in terms of the 
number of individuals covered.
    We have also seen how many insurers are choosing to pull 
out of various markets, not just the failure of co-ops, but 
various markets that insurers are pulling out of.
    Mr. White and Mr. Condeluci, how were the bill's drafters 
and HHS so wrong about the risk corridor program?
    Mr. CONDELUCI. I will jump in to say, when the drafters 
were drafting the ACA it was well established that the 
individual market pre-ACA was dysfunctional. So the drafters 
endeavored to incorporate minimum standards, a guarantee issue 
which allows access to folks with preexisting conditions, to 
make the market a much more functional market.
    Sadly, as I think has been established by the witnesses 
here and the discussion today, it is not a functional market. 
It is functioning, but it is not a functional market, even 
post-ACA.
    But to your question, and the reason why I bring up the 
drafters, is due to the reforms, the drafters knew that there 
would be significant disruption in the individual market. So as 
a result, they created the stabilization programs, the risk 
corridor, risk adjustment, and reinsurance program.
    Risk corridor, the drafters did expect, and I believe, as 
did HHS expect, that there would indeed be the same amount of 
carriers asking for a risk corridor payment or making a request 
for a risk corridor payment due to their losses associated with 
insuring higher risk individuals, which would be balanced out 
by carriers that would be insuring younger, healthier 
individuals. And due to the fact that, as we have established, 
younger and healthier individuals have not entered the risk 
pool, the insurance carriers had suffered the losses, and more 
significant losses compared to insuring those better risks.
    Mr. SMITH OF NEBRASKA. Okay. Shifting gears just a little 
bit because of the interest of time here, we now know that the 
President is calling for a public option. Secretary Clinton is 
now calling for a public option.
    With the wild failure of the co-ops within ObamaCare 
occurring, I mean, is there any reason we would believe that 
somehow that would be a better situation? I struggle to think 
that it would be. I mean, with the Federal backstop that was 
out there spending gobs of money, taxpayer dollars, to try to 
prop up these plans, I just fear that we would see a different 
kind of failure within a public option.
    My time has expired. I regret that. But if you would care 
to respond in writing, perhaps, I would be happy to hear each 
of your perspectives. We have folks on both sides of the issue 
here. I would love to hear more in terms of what your 
perspectives are moving forward. Thank you.
    Chairman BRADY. Thank you.
    Mr. Pascrell, you are recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    A couple of points before I ask the question. A, we can't 
blame, and I don't think any of you are, every problem in 
healthcare costs on the ACA, I think we have to make that very 
clear, like we came from a perfect system to an imperfect 
system. In fact, as I recall, your history shows that 
regardless of what party you are affiliated with, which is 
immaterial to me right now, that you were all advocating some 
changes because the system was broken. It was broken. So that 
is A.
    B, in order to change anything here, whether you are 
talking about trade, whether you are talking about anything, 
you need bipartisan support to make a lasting change. We have 
done that in Medicare, we have done that in Social Security, 
and we have done it in Medicaid, with very different parties at 
the helm at the White House. It can be done.
    I didn't hear from any of you, through the chair, that we 
should dump the ACA. Am I mishearing? Before I go on to my next 
question, is anyone here on the panel advocating getting rid of 
the ACA altogether as it now is?
    Mr. CONDELUCI. From my perspective, sir, no.
    Mr. WHITE. We are not.
    Mr. HARTE. I am not.
    Mr. LEE. No.
    Mr. PASCRELL. Let's make that clear, Mr. Chairman. Let's 
make it clear. Very important. Very significant. You not only 
have good panelists, you have honest panelists. They are 
dangerous. No question about it.
    Mr. CONDELUCI. If you will indulge me, sir, there are some 
caveats.
    Mr. PASCRELL. Of course. You want to have some changes and 
so do I.
    Now, some of you emphasized the unbalanced risk pool. Major 
problem. How do you get those 18 to 35s into the pool? You 
can't arrest them and put them into the pool. We need to do 
something about that. California has, and we will get to that 
in a second.
    So the unbalanced risk. This is something we need to take a 
look at very, very, very closely. All of you have mentioned 
other things that are contributing to the cost. There are no 
two ways about it. How do you track younger, healthier 
individuals?
    And the last point I would make before I ask the question 
is, the uninsured rate--Mr. Harte, you mentioned this--the 
uninsured rate is falling, but there is an increase in 
deductibles. That, you said, was one of the main reasons--many 
of you said this--what those deductibles were before the ACA, 
what the deductibles percentage-wise are now. We need to take a 
look at that. There is no question. Transparency, you talked 
about it also.
    So I would like to add just one thing, by the way, to the 
cost, and that is we have a growing emphasis in this society on 
consolidation and merging. In fact, there was a report out last 
December about how that is contributing to the higher cost of 
health care.
    So now we have 250 million people that are covered either 
by their employer, by the ACA, Medicaid, whatever. Have 
250,000.
    And I want to ask this quick question. Are we simply 
talking about then, if 85 percent of the people are covered in 
the ACA, these 20 million people, they get subsidies, are we 
basically talking about the 15 percent that don't get 
subsidies? Is that how I understood all of you saying?
    Mr. CONDELUCI. I would offer this, sir, that in the 
individual market there are about 20 million people. Right now 
there are about 11.1 million who are enrolled through an 
exchange, and 85 percent of that 11.1 million are receiving 
subsidies. So that is 9 million people receiving subsidies.
    So you take, let's say, the 9 million people who are not in 
the exchange, and you can make an argument that that is a 
population that is experiencing these premium increases without 
any subsidization, and you hear the stories that you have 
heard.
    Mr. PASCRELL. I would be happy, and my last question is 
this. Mr. Lee, my time has run out, what I'd like you to 
discuss, you can't do it now, some of the tactics that Covered 
California has used to limit out-of-pocket costs. I find them 
to be very interesting. Perhaps you could share them with your 
colleagues here and the rest of us in dealing with a very 
important issue. This is important for everybody.
    And, Mr. Chairman, let me conclude by asking how in God's 
name do we have a panel without the HHS Secretary.
    Chairman BRADY. Thank you. Ms. Burwell has been invited a 
number of times to discuss the Affordable Care Act with us, 
including the shifting of money illegally to fund health 
insurance companies, which the hearing was last week.
    All time has expired.
    We will be going to two to one to make sure we can cover 
all the members here.
    So, Mrs. Black, you are recognized.
    Mrs. BLACK. Thank you, Mr. Chairman. I appreciate your 
having this very important hearing.
    The issue of rising premium costs is something that, 
unfortunately, our constituents are facing every day. I 
certainly hear it constantly in my district. And across America 
folks are being forced to choose between paying more for less 
coverage in smaller networks or just foregoing health insurance 
altogether. Again, this is what I am hearing in my district 
continuously.
    And it is hard for me to believe that my colleagues across 
the aisle aren't hearing a very similar story. And if they are 
not hearing any of this, I am really curious about what is 
going on in their State that is causing them not to hear from 
their constituents that the Affordable Care Act has impacted 
the quality of care, the accessibility, the sustainability of 
health insurance in this country.
    So in my home State of Tennessee, premium rates in the 
marketplace are expected to increase by 62 percent--62 percent 
in 2017. So for anybody to say, ``Well, costs aren't going up, 
they are being contained,'' it just amazes me. I expect the 
Obama administration would tout this as a nonissue, however, 
since 80 percent of the marketplace enrollees in Tennessee are 
eligible for subsidies.
    But I have to ask, is this how we want our health care 
system to work, with costs rising astronomically for this 
mediocre care that is being given, where you can't choose your 
doctor, you can't choose your facility, you can't choose your 
specialty? ObamaCare is forcing more and more Americans to 
accept the government subsidies to afford even the most basic 
coverage.
    Now, I want to read to you very quickly a letter that I 
just received this week, which is not uncommon to get this kind 
of letter.
    ``Hello, Mrs. Black. I am 32 years old. I am a married 
mother of three. I have no preexisting conditions, I don't 
smoke, and I live a very healthy lifestyle. Why, then, with the 
Affordable Care Act, is my insurance company canceling my great 
low deductible, low premium multibenefit plan next year and 
forcing me to choose a plan that offers less coverage, triple 
the deductible, triple out-of-pocket expenses, with a much 
higher premium?
    ``Now it will be less expensive for me to pay a yearly tax 
fine, and I will have to give up my insurance that I have had 
for 7 years that I am happy with. I am well aware of the so-
called tax credit available to people such as myself, but I 
have paid for my own insurance for many years without the 
government's help, and if my premiums were to remain 
reasonable, I wouldn't need a tax credit.''
    So my question is, is it the role of the government to 
force people out of the health insurance that they like and 
that they can afford and they have used for years into a plan 
that would require taxpayer-funded subsidies to afford the most 
basic coverage? Shouldn't we be removing those barriers and 
mandates to encourage people to actually control their own 
health care and allow the open markets to keep the plans 
competitive and affordable and accessible?
    Mr. White, I would like to start with you. I know I only 
have 2 minutes left. So if you could address those.
    And then, Mr. Condeluci, and then, Mr. Harte, if you would 
address those, I would appreciate it.
    Mr. WHITE. Yeah, I think the scenario that you outlined in 
that letter is exactly the scenario that a lot of people are 
facing in deciding whether or not to enroll in the exchanges. 
And a lot of those people are saying: No, it doesn't make sense 
for me financially or otherwise, with or without subsidies.
    So CHAC is advocating for market-based reforms that improve 
flexibility, that create additional options for consumers, 
using those subsidies on and off the exchanges to create a 
market for competing for those lives.
    Mrs. BLACK. And it will allow people to get what they want 
and what they need as opposed to what the government is telling 
them they want or need.
    How about you, Mr. Condeluci?
    Mr. CONDELUCI. As I have suggested, the minimum insurance 
standards, the adjusted community rating rules, the new rules 
that came in to make the individual market a much more 
functional market are driving up costs. That is just the nature 
of how these reforms have impacted the insurance market.
    I would suggest that insurance carriers be allowed 
additional flexibility to come up with more creative plan 
designs, creative plan designs that could be targeted to 
different cohorts of the population. As I indicated earlier, 
obviously the young and healthy, but, in addition, folks that 
have chronic illnesses, like diabetes, heart disease.
    If carriers were able to better manage that care, that 
helps folks across the board from an insurance perspective, but 
the drafters of the ACA wanting to, let's say, require that 
everyone have an adequate level of coverage, has, I don't want 
to use the word ``overreached,'' but it just has increased 
cost.
    And if you pull that back, I am not suggesting that we get 
rid of the minimum standards or guaranteed issue, for example, 
which I am a fan of, if you loosen them up, I believe you can 
reduce premiums.
    Mrs. BLACK. Mr. Harte, you have 15 seconds. I apologize.
    Mr. HARTE. Thank you.
    All I will say to you is, we have to look through a prism 
of are the decisions that we are making going to make health 
insurance more affordable? I don't know if it makes you 
comfortable or uncomfortable, but I deal with the issues of 
plan changes every single day, and I have to share those 
changes with thousands of people every year. So you are not 
alone, and that is what we need to focus on.
    Mrs. BLACK. Thank you, Mr. Chairman. I yield back.
    Chairman BRADY. Thank you.
    Mr. Kelly, you are recognized.
    Mr. KELLY. Thank you, Chairman.
    Thank you all for being here.
    I come from the private sector, and I was not here whenever 
the healthcare law was debated and then passed, but I can tell 
you as a person who actually provides insurance for the people 
that I work with, we have seen premiums--this is for a family, 
a mom and dad with a couple children--it has gone from about 
$800 a month to $1,150 a month. That is the premium.
    Now, maybe you all can explain this, because I am just 
looking at this as a business model right now. When you take in 
$1 in premium and pay out $1.20 in claims, that is not a 
sustainable business model. So I think, rather than going after 
the insurance companies and saying, ``Hey, you guys are trying 
to make money,'' I mean, if you don't make money, you go out of 
business, I kind of get that from my life experience, but the 
copays and the deductibles are also part of health care.
    So when I talk to people--and with ours right now it is 
$3,000 in deductibles before insurance kicks in--they have 
heavy copays. And if you go to the emergency room, that is 
another charge on top of it. So most of the folks I talk to 
back home are saying: Yes, I do have insurance, but I don't 
have coverage until I go past a certain point.
    Now, I am understanding some of the people that I 
represent, some of their increases are going to be 38 to 40 
percent. That is what they are going to ask for it. They are 
not going to get that, but they are going to get something. And 
then the question comes down to, well, that is not as big of a 
problem on the premiums because there are going to be subsidies 
that are going to take care of that.
    So Mr. White, Mr. Condeluci, Mr. Harte, Mr. Lee, who is 
going to pay for the subsidies?
    Mr. WHITE. Taxpayers will. And that is the problem, right? 
We are shifting costs, we are not lowering them. We need some 
strategies to lower the costs.
    The other issue I would say on the deductibles is that only 
half of Americans have enough liquid assets to meet higher 
deductibles, according to the Kaiser Family Foundation.
    Now, the problem with the ACA exchanges is that in many 
instances they are masking the availability of account-based 
plans like health savings accounts. If people knew and were 
informed that HSAs could help them fill in deductibles on a 
tax-preferred basis, we might get some help in meeting some of 
those deductibles.
    Unfortunately, we are also seeing some policies come out in 
the regulatory front that are discouraging the use of HSAs on 
the exchanges, either healthcare.gov or at the State level.
    And so there are tax tools that we can use to help fill in 
these deductibles. They are just not being employed very 
effectively.
    Mr. KELLY. Mr. Condeluci.
    Mr. CONDELUCI. Briefly, the premium subsidies, as we all 
know, shield some of the policyholders from the premium 
increases, and that has been established----
    Mr. KELLY. If I can interrupt you one second, though. But 
the subsidy doesn't change the actual cost.
    Mr. CONDELUCI. It does not.
    Mr. KELLY. I think that is the problem, we get into this 
idea that somehow the subsidy is going to make it okay. Because 
at the end of the day, somebody still has to pick up the tab on 
it.
    Mr. CONDELUCI. Right.
    Mr. KELLY. The answer is hardworking American taxpayers.
    Listen, oftentimes our hearts are willing but our wallets 
are weak. We are putting such a heavy burden on the private 
sector right now and the people that provide this, believe me, 
because I am one of them. I provide that for the people I work 
with.
    See, the sustainable business model is the thing I think we 
are turning away from. It is not that we don't want to make 
sure that people have health care.
    By the way, we are not talking about sick Republicans, sick 
Democrats, sick Independents, or sick Libertarians. We are 
talking about sick Americans that need help. I want to make 
sure that we don't make it a thing about our parties, but about 
our people.
    So the sustainability of it is where we have to go on this, 
and that is where I am seeing the disconnect.
    Mr. CONDELUCI. Because as the premiums go up, the 
government shields those premium increases in the form of 
higher government spending, which is in the form of the premium 
subsidy, that is. So there is a tension between increased 
premiums, how the subsidy works, and how they shield consumers 
from those premium increases.
    It is not the consumer that has generally experienced that 
premium increase, instead it is the government, and at a point 
you might have an unsustainable situation from a spending 
perspective.
    Mr. KELLY. We keep using the term ``the government.'' The 
government doesn't pick up the tab on anything. The government 
collects money from hardworking American taxpayers and 
redeploys it where the government thinks it should go.
    So we take the decision out of the individual's hands of 
how they are going to purchase products, and we say this is how 
you are going to do it, and if it is too steep, we will 
subsidize it without saying: By the way, you are going to pay 
for the subsidy.
    Mr. Harte, if you could just weigh in. I am almost out of 
time. But this is critical people understand. This is an 
unsustainable business model. It has nothing to do with wanting 
to provide people with health care. It is to the point that it 
is going to reach that we can't do it and taxpayers can't be 
burdened every time we want to do something.
    Mr. HARTE. They simply can't afford it. You are absolutely 
right. Those subsidies are coming from my business, from my 
employees, from your employees, and everyone across the country 
to pay for these taxes.
    But you are actually pretty lucky. For someone in your 
company to have a $3,000 deductible and a $1,100 premium, that 
is pretty good. Where I come from, where healthcare costs are 
soaring, we have to pay three times that. We have families who 
are paying over the Cadillac tax limit already for an average 
health insurance plan. So you are right, I am concerned just 
like you, very concerned.
    Mr. KELLY. Thank you.
    Chairman BRADY. Thank you.
    Mr. CONDELUCI. To clarify, Mr. Chairman, my reference to 
government was taxpayers.
    Chairman BRADY. Thank you.
    Dr. Davis, you are recognized.
    Mr. DAVIS. Thank you very much, Mr. Chairman. And I 
certainly want to thank our witnesses for being here today.
    Mr. Lee, opponents of the Affordable Care Act have been 
trying any tactic that they can think of to discredit the law 
or to make consumers look unfavorably on it. One of the red 
herrings opponents have used is try to make consumers think 
that the law is unaffordable due to premium increases. It is my 
recollection that premiums were going up, increasing before the 
Affordable Care Act. Is that not true?
    Mr. LEE. That is definitely true.
    Mr. DAVIS. Now we have, with the ACA, what I would call a 
pretty significant improvement. For example, consumers are 
guaranteed critical protections when they purchase insurance, 
limits on rating based on age, requirements insurers must spend 
a certain amount on care. And also State officials have 
stronger tools to review unreasonable rate increases, along 
with transparency, so that the public knows which insurers are 
jacking up prices and why.
    Could you comment on this environment?
    Mr. LEE. Yeah. The main comment is that it is absolutely 
the case that the post-Affordable Care Act insurance 
marketplace is a reformed but still imperfect marketplace, but 
it is in a marketplace now where insurers have to compete on 
price to get consumers who cannot be turned away. It is a 
different marketplace, and there is transparency. And many 
consumers--not all--have many choices that they can exercise to 
make that marketplace work.
    It is also the case, if I may, that many of the problems we 
are hearing about are not Affordable Care Act problems. They 
are health care in America problems. Issues of rising 
healthcare costs, as we heard from Mr. Harte, of rising costs 
of up to 30 percent on people's employer-based care. This is 
the range of what small businesses, large businesses, 
individuals are facing that we all need to get our arms around.
    Mr. DAVIS. While we laud the California experience, 
Illinois hasn't done too badly itself, the State that I come 
from. What caused California to be able to accomplish what we 
all know and believe it has accomplished?
    Mr. LEE. I think, well, first, I want to be very clear, 
there have been a number of States that have been very 
effective in implementing the Affordable Care Act. You can look 
at the State of Connecticut, you can look at Illinois, you can 
look at Washington. There are a lot of States.
    The thing that they have in common is--and I know this is a 
hard thing to say in this environment--but they put politics to 
the side. And in California, our working has been with 
Republican members of our State legislature, have been with 
every single district elected office, it is with people who 
have said this is the law now, let's make it work.
    And so the issue of having effective outreach and 
education. I have said this a couple of times, but health 
insurance doesn't sell itself. And we are out there spending a 
lot of money because people that need to sign up for health 
insurance say: Maybe I don't want to.
    The ones we need to convince most are the ones who need it 
the least who will benefit the risk pool, which requires 
ongoing, very significant marketing, outreach, partnerships 
with agents, et cetera. And that is something that the States 
that have been most successful have consistently leaned in on 
those outreach efforts.
    Because those people that get subsidies, which in 
California is about a million, and there are about a million 
people in the individual market without subsidies, those 
nonsubsidized people benefit from the people who get subsidies 
because they are part of the better risk pool, they are part of 
keeping premiums down for everybody.
    So it really is a win-win when we get subsidized people in 
to help keep the premiums down for those even that don't have 
subsidies.
    Mr. DAVIS. Thank you very much. And I think that was part 
of the intent from the beginning that many people discount. I 
think the reality is that it is working much better than many 
people would have us believe.
    I thank you, Mr. Chairman, and yield back the balance of my 
time.
    Chairman BRADY. Thank you, Doctor.
    Mr. Renacci, you are recognized.
    Mr. RENACCI. Thank you, Mr. Chairman.
    And I want to thank the witnesses for being here with us 
here today and presenting the information. This hearing is 
really extremely important, and I appreciate your expertise.
    I, like one of my earlier colleagues, believe that when 
those that voted for the Affordable Care Act, they sincerely 
believed they were helping. Let's face it, I am sure that was 
their thought process when they voted for it. But it is 
disingenuous today to ignore the fact that there are problems.
    Unfortunately, since the passage of the Affordable Care Act 
the access to affordable care has significantly dropped. There 
is no denying that since the ACA premiums are rising, 
deductibles are rising, and many people can no longer afford 
their healthcare plans. And we are hearing the proposed rate 
filings for 2017 on the Federal marketplace are projected to 
increase a median of 19 percent.
    I go back in my district and I have meetings with 
employees. Every time I meet with an employer, I want to meet 
with the employees. I ask the same question: Are you happy with 
the Affordable Care Act? Are costs okay? How are things going? 
I am going to have to bring some of my colleagues from the 
other side with me because I get very few people put up their 
hand and say they like it.
    Now, some people do. I am not going to lie and say it is 
not 100 percent. But it is a very, very small portion of the 
people in the crowd, and I am talking about hundreds and 
hundreds of people. So I always ask them a question: Tell me 
what tissues are. Tell me what the problems are. I try and 
learn from it.
    Look, no law passed is going to be 100 percent perfect. But 
I go back to my colleague last year, John Carney. He tried to 
pass H.R. 4414, which was a fix to the Affordable Care Act, and 
we got that passed. The sad thing was that the majority of 
Democrats, over 133 Democrats, even came to the floor and said: 
We can't change anything because if we change it, we are going 
to open up the doors to changing more things.
    So 133 people even voted against a simple change, ignoring 
the fact that there are problems, and those are the things we 
have to fix. Just last month, in my home State of over Ohio, we 
had the 13th co-op, InHealth Mutual, announced it was going out 
of business. This was 1 of 23 co-ops created under the ACA, had 
received 129 million in taxpayer funds, had left nearly 22,000 
Ohioans with fewer choices and, unfortunately, once again, 
searching for new health insurance.
    So again, we know there are problems out there. We can say 
we don't, we can talk about how great the Affordable Care Act, 
it has problems, and we have to start looking at those 
problems.
    I have had people in my district, Brian from Westlake, 
saying he has lost his choices. I have another constituent, 
Scott from Dalton, saying his plan jumped from $314 in 2013 to 
$920 in 2016. He simply couldn't afford to continue with this 
plan and he had to go to a higher deductible. I had another 
individual, John, a registered Democrat from Brewster, who said 
he now calls the ACA the Unaffordable Care Act. So these are 
real people, real lives, real things affected.
    But the saddest story I ever had was a woman walking up to 
me at a restaurant saying: Congressman, I just had my hours 
reduced to 29 hours, and now my premiums are going up and I 
have a deductible I can't afford. Help me. That was the saddest 
moment when it came to the Affordable Care Act--help me--and 
that is what we need to do.
    So I want to talk a little bit about this deductible, 
because we have talked about premiums. Nobody can argue that 
premiums are going up. They are going up. Everybody knows that. 
They are going up again this year. But we are getting people 
insurance, and I have an individual in my district who has 
fully subsidized insurance, but came to me and said: 
Congressman, thank you for allowing me to get insurance.
    I said: Well, I wasn't part of the vote for the Affordable 
Care Act. But she says: I can't use it anyway because I have a 
$6,000 deductible that I now can't use. The insurance is 
worthless for me. I need surgery, and I can't get it done 
because I can't afford that.
    Mr. White, can you talk a little bit about the 
deductibility, how this deductibility is affecting people and 
the size of it and how that hurts people getting health 
insurance?
    Mr. WHITE. It is massive, and it is not just the 
deductibles. So the deductibles are increasing on average by 
about 20 percent, or they increased 20 percent this year. So 
the average Silver plan has about a $3,000 deductible, the 
average Bronze plan has about a $6,000 deductible, but $10,000, 
$12,000 deductibles are not uncommon.
    And the reason these deductibles are at that level is that 
it allows the insurer to lower the price point, the premium 
rate that they sell on the exchange. A lot of consumers will 
shop for a plan based on the premium, not necessarily the 
deductible.
    Mr. RENACCI. So you would agree that, because of the 
Affordable Care Act and because premiums are going up, the only 
way to reduce the premiums is to raise the deductible, which in 
the end, who pays? The American people.
    Mr. WHITE. The consumer, absolutely. And it is not good, 
because, as you indicated, when you have these massive 
deductibles, you are not accessing care. So you are not getting 
maybe the diabetes care, the coach management, the preventive 
care, the well baby care, the things that you really need to 
stay out of the hospital, out of expensive settings. It is 
unsustainable over the long term.
    Mr. RENACCI. Thank you, Mr. Chairman. I yield back.
    Chairman BRADY. Thank you.
    A vote has been called. We would like to finish with Mr. 
Meehan and Mr. Holding.
    Mr. Meehan, you are recognized.
    Mr. MEEHAN. Thank you, Mr. Chairman.
    I just want to say at the outset, just to comment, I know 
some of the commentary from the other side of the aisle 
regarding that part of the problem is that insurers are 
miscalculating. We sat here last week and listened to the 
design of a plan in which over $7 billion was illegally 
transferred to the insurance companies and still not capable of 
holding down these costs. That was what the record 
demonstrated.
    But I want to follow up on Mr. Renacci's questions with the 
panel because it is really going to the issue. We hear a lot 
about people saying we have more people insured. What I am 
seeing in mid district are the underinsured. These are people 
who are working, who have been watching the explosion of the 
various factors. You named them. It is the copays, the higher 
premiums.
    And the biggest problem is, just like many seniors now 
split their medications by taking half and do away with the 
effect, we are having people that won't use health care at 
certain times, and situations are getting worse.
    Mr. White, I went back through the written testimony of 
each of you. I was very impressed with lots of it. You had some 
things to say about the special enrollment periods influencing 
this, Mr. White. And can you tell me about what you see as the 
reforms in the special enrollment periods quickly, if you can, 
and whether what the administration is currently doing is going 
to be sufficient to impact that?
    Mr. WHITE. I am not sure what the administration is doing 
is sufficient. I think what needs to be done is that you need 
to clamp down on some of the abuses that are taking place 
because of the special enrollment periods. People are jumping 
into and out of these risk pools, gaming the system in effect, 
and the enforcement is not rigorous enough to prevent that type 
of gaming.
    So having prospective eligibility is probably--let me put 
it this way. I think you don't automatically get the person in 
the plan until you can verify that they actually meet the 
requirements of the special enrollment period, and then you can 
make their coverage retroactive to cover the claims expenses. 
You don't just do that at the outset, though.
    Mr. MEEHAN. You think it was a rush, so to speak, just to 
get numbers, but they are not appropriately overseeing the 
entrance into the program?
    Mr. WHITE. Yeah. It was a big problem. I think there were 
40-some-odd special enrollment periods. One insurer that we 
work with quite a bit in our coalition said it, added about 3 
percent to the premium that they have got to carry into next 
year. So this is a real impact on people.
    Mr. MEEHAN. Thank you.
    And, Mr. Harte, you spent some time, you laid out a number 
of things, but again, I go back to the issue of the uninsured. 
And this was the point that was being made, I think so 
eloquently, by my colleague Mr. Renacci.
    I am watching in Pennsylvania, 21 percent reported that 
deductibles and 18 percent reported that premiums were their 
greatest financial challenge. So we are seeing that these are 
the things that are impacting people. The rate of uninsured is 
going down, but the costs associated with those that have it is 
skyrocketing.
    So what combination of reform should be advanced to address 
the challenges of individuals and families with insurance? They 
have insurance, but they can't afford health care. What would 
you recommend?
    Mr. HARTE. So if I can first say, my clients, when I sit 
down with them and they are faced with a 29 percent rate 
increase, as I testified to earlier, my job with that client is 
to say: What can we do to cut costs?
    So the first thing we have to look at is: Okay, you have a 
$3,000 deductible today, how much can we save to go to a $4,000 
deductible? And that is about 10 percent. And then we say: What 
is it going to take you to go to a $5,000 deductible? It might 
be another 5 percent.
    And then we start looking at the prescription drug costs, 
and the traditional drug plan would be $10 for generic and $25 
or $40 for brand name. Today, the health insurance companies 
have moved away from that entire equation, especially for small 
employers, and told the employees that they insure: Well, you 
are now going to pay a percentage of the brand name 
prescription cost.
    Now, this is New England, okay, but it is happening all 
over the country. Now they are having to pay 30, 40, 50 percent 
of the monthly cost of that prescription up to a monthly cost 
share of $500. That is significant.
    So when you talk about the underinsured, we are not just 
talking about access to doctor's office visits or primary care, 
specialty care, physical therapy, emergency rooms, 
hospitalization, it is the entire healthcare equation that 
people are underinsured.
    So the question is, what can we do, that is your final 
question. As I said earlier, health insurance is expensive 
because health care is expensive. And as much as we talk about 
the Affordable Care Act and that the issue is all about health 
insurance or health insurance companies, it is really a 
financing mechanism.
    When you look at health insurance, we are taking 80 to 85 
percent of that money and paying for healthcare expenses. So 
the reason why health insurance premiums continue to escalate 
at such an alarming rate is because healthcare costs continue 
to soar out of control.
    Mr. MEEHAN. Thank you, Mr. Harte.
    Thank you.
    Chairman BRADY. Thank you.
    Mr. Holding, you are recognized.
    Mr. HOLDING. Thank you, Mr. Chairman.
    First, I would like to give a little state of play in North 
Carolina. Our largest insurer in the State has been approved 
for an average rate increase of 25 percent in 2015 and 34 
percent in 2016 and 18 percent in 2017. But even with these 
consistent double-digit rate increases, BlueCross BlueShield, 
the insurer I reference, has lost over $400 million in the last 
2 years.
    And even though they have been given these rate increases, 
yeah, it doesn't ensure that they are going to stay and 
continue to offer plans throughout North Carolina. And we are 
looking at a potential situation where 60 out of our 100 
counties might be left without a single ACA plan offered.
    I would like to pick up where Mr. Smith from Kansas left 
off. You hear this argument that, well, the public option, if 
that is put in place, it cures all these problems.
    Mr. White, could you address the public option and whether 
or not it would cure the ills that we see with the ACA as it 
exists today?
    Mr. WHITE. I think the public option is a bad option. I 
think that it is government coming in to promote competition in 
a market in which they have basically evaporated competition.
    So this is a problem that was caused by government 
inflexibility that made insurers leave the market. They are 
losing money. We are seeing it in co-ops. We are seeing it in 
North Carolina. We are seeing it in other markets across the 
country.
    So the proposed solution is let's have the government run a 
plan in that marketplace so that people have choices. Well, 
they had choices before, right? So how do we flex up the 
market, how do we create a competitive environment so that the 
insurers will want to go back in? Tennessee had a very 
significant experience in this in the Medicaid market.
    I mean, like, this isn't necessarily rocket science. We 
ought to let the market operate in a way that fosters 
competition and an environment to offer products.
    Mr. HOLDING. Thank you.
    Mr. Chairman, in the interest of time, I will yield back so 
that we are not late for our vote.
    Chairman BRADY. You are kind, Mr. Holding. Thank you very 
much.
    I would like to thank our witnesses for appearing before us 
today. Please be advised, members have 2 weeks to submit 
written questions to be answered later in writing, and those 
questions and your answers will be made part of the formal 
hearing record.
    With that, the committee stands adjourned. Thank you.
    [Whereupon, at 12:32 p.m., the committee was adjourned.]

                   Member Submissions for the Record


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