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20–995 2014

HEARING ON THE STATUS OF THE AFFORDABLE 

CARE ACT IMPLEMENTATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 10, 2014

SERIAL 113–HL16 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan,Chairman 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

TIM GRIFFIN, Arkansas 

JIM RENACCI, Ohio 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

ALLYSON SCHWARTZ, Pennsylvania 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

JENNIFER M. SAFAVIAN, Staff Director and General Counsel 

JANICE MAYS, Minority Chief Counsel 

SUBCOMMITTEE ON TRADE 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

JIM MCDERMOTT, Washington 

MIKE THOMPSON, California 

RON KIND, Wisconsin 

EARL BLUMENAUER, Oregon 

BILL PASCRELL, JR., New Jersey 


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C O N T E N T S 

Page 

Advisory of September 10, 2014 announcing the hearing .................................... 2 

WITNESSES 

The Honorable John Koskinen, Commissioner, Internal Revenue Service ......... 8 

Andy Slavitt, Principal Deputy Administrator, Centers for Medicare & Medicaid Services, Department of Health and Human Services ............................ 62 


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(1) 

HEARING ON THE STATUS OF THE 

AFFORDABLE CARE ACT IMPLEMENTATION 

WEDNESDAY, SEPTEMBER 10, 2014 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:06 a.m., in Room 

1100, Longworth House Office Building, the Honorable Kevin 

Brady [chairman of the subcommittee] presiding. Advisory 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON HEALTH 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3625 

Wednesday, September 3, 2014 

No. No. HL-15 

Chairman Brady Announces Hearing on 

Status of the Affordable Care Act Implementation 

House Committee on Ways and Means Subcommittee on Health Chairman Kevin 

Brady (R-TX) today announced that the Subcommittee will hold a hearing on the 

Administration’s continued efforts to implement and administer the Affordable Care 

Act (ACA). The Committee will hear testimony from Andy Slavitt, Deputy Principal 

Administrator of the Centers for Medicare & Medicaid Services (CMS) at the U.S. 

Department of Health and Human Services (HHS), and John Koskinen, Commissioner of the Internal Revenue Service. CMS is the federal agency that oversees the 

operation of the Exchanges through the Center for Consumer Information and Insurance Oversight (CCIIO), and the IRS oversees the distribution and verification 

of the subsidies in the ACA. The hearing will take place on Wednesday, September 10, 2014, in 1100 Longworth House Office Building, beginning at 

10:00 A.M. 

In view of the limited time available to hear from the witnesses, oral testimony 

at this hearing will be from the invited witness only. However, any individual or 

organization not scheduled for an appearance may submit a written statement for 

consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

As the ACA’s Exchanges approach the second enrollment period, beginning on November 15, 2014, CMS and the IRS continue to implement new policies to address 

on-going problems including: the delay of the employer mandate; the back log in resolving eligibility inconsistencies; the failure to complete the back-end systems for 

the Exchanges; and the numerous exemptions to the individual mandate. Many of 

these challenges were identified at a Health Subcommittee hearing on December 4, 

2013, and remain unresolved. 

The ACA provides for an income-based premium tax credit for certain individuals 

who purchase health insurance through the new Exchanges. The accuracy and 

availability of these tax credits, which began with coverage on January 1, 2014, depends on multiple pieces of data, including an individual’s income and eligibility for 

affordable employer-sponsored insurance. The Administration’s 2013 decision to 

delay employer-reporting requirements continues to complicate the government’s 

ability to verify an offer of ′′affordable employer-sponsored insurance.′′ 

The accuracy of these tax credits, which are paid directly to insurance companies, 

cannot be guaranteed without accurate income and insurance information. As a result of the failure to provide complete and accurate information, the government 

may overpay and be forced to rely on the IRS to recover overly generous tax credits 

from individuals during the 2015 tax-filing season. 

On January 1, 2014, Health and Human Services Secretary Kathleen Sebelius 

certified the ability of HHS to verify the income and eligibility of enrollees on the 

Exchanges and healthcare.gov, as she was required to do so by law. The Continuing 

Appropriations Act, 2014 required that ′′prior to making such credits and reductions 

available, the Secretary shall certify to the Congress that the Exchanges verify such 

eligibility consistent with the requirements of such Act.′′ Despite the Secretary’s cerVerDate Mar 15 2010 21:05 Oct 20, 2016 Jkt 020995 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\20995.XXX 20995

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tification, a June 2014 HHS Office of Inspector General report noted that CMS had 

yet to verify nearly 1 million income inconsistencies potentially putting at risk millions in taxpayer dollars through inappropriate subsidies/1/. 

In announcing the hearing, Chairman Brady stated, ′′This White House continues to rewrite the President’s health care law because the law is unworkable. The growing number of American families losing the health insurance they have and like is not something that can be glossed over. The 

White House must come clean with the American public and tell us how 

they will fix this mess before the beginning of Open Enrollment in November. More delay and confusion will only result in more mistrust and more 

families losing access to the health insurance that works for them and 

their families. The Centers for Medicaid and Medicare Services and the IRS 

need to do more to protect American families and taxpayers.′′ 

FOCUS OF THE HEARING: 

The hearing will focus on the status of the Obama Administration’s implementation and oversight of the Affordable Care Act. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the 

hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ′′Hearings.′′ Select the hearing for 

which you would like to submit, and click on the link entitled, ′′Click here to provide 

a submission for the record.′′ Once you have followed the online instructions, submit 

all requested information. ATTACH your submission as a Word document, in compliance with the formatting requirements listed below, by the close of business on 

Wednesday,‘‘ http://oig.hhs.gov/oei/reports/oei 01 14 00180.pdf’’September 24, 

2014. Finally, please note that due to the change in House mail policy, the U.S. 

Capitol Police will refuse sealed-package deliveries to all House Office Buildings. 

For questions, or if you encounter technical problems, please call (202) 225-1721 or 

(202) 225-3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202-225-1721 or 202-226- 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 


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Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov

f 

/. 

The subcommittee met, pursuant to call, at 10:06 a.m., in Room 

1100, Longworth House Office Building, the Honorable Kevin 

Brady [chairman of the subcommittee] presiding. 

Chairman BRADY. Committee will come to order. The Affordable 

Care Act has changed how Americans receive their healthcare. 

There has been ample debate over the last 4 years about the ACA 

and what impact it will have. Today we have the chance to look 

in the rearview mirror and judge results rather than the rhetoric 

and promises, and we have the opportunity to look forward to next 

year to see what other changes and surprises may lay ahead for 

the American people. 

It is no surprise that I and many of my colleagues on this side 

of the aisle were very concerned about what would happen with the 

rollout of the ACA and HealthCare.Gov. Unfortunately, for the 

American people, many of those concerns came true. The ACA has 

helped some Americans, no doubt, but has hurt many more. Millions of families lost their doctor and their healthcare plan. Millions more saw their premium spike because of new taxes and regulations that provide them with no additional coverage, just more 

costs, and many more workers saw their hours cut as businesses 

prepare for further mandates. 

But worst of all, many Americans have lost trust in our government when it comes to being honest about its healthcare promises. 

Many patients fear what may be in store for them next. They have 

lost their health care they have and like, lost their doctor and are 

seeing their premiums soar. And for those that end up in the government exchanges, the ones that the law was supposed to help, 

they were subjected to a disastrous rollout of HealthCare.Gov, 

delays as paperwork went missing, and the ongoing reality that 

they may owe thousands of dollars back to the IRS for subsidies 

they are not eligible for. Not because they did anything wrong, but 

because the ACA income verification system was not and still is not 

working. 

But the administration assures us next year its smooth sailing. 

Unfortunately, the answer to that is ‘‘no.’’ Open enrollment has 

been delayed until November 15. I am worried that individuals 

won’t enroll. The Centers for Medicare and Medicaid Services recently announced that if individuals don’t select a new plan by December 15, they will be auto enrolled in their old plan. 

The problem with that, however, is that their premium tax credit, if they get one, will be based on the one they are receiving 

today, whether accurate or not. If a person wants to accurately 

know how much of a subsidy they will receive for 2015, they need 

to go through HealthCare.Gov again. Yes, the HealthCare.Gov that 

was just hacked, carries the risk of putting Americans’ sensitive, 

personal information at risk. 

In plain English, it means that working families will have to 

wait that much longer or work that much harder to find out how 

much their health care will cost next year. It is not right for those 

trying to put together their family budgets right now. What is also 


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not right is the fact that the ACA’s income verification is still not 

working. 

Despite Secretary Sebelius’ certifying to Congress on January 1st 

of this year that a working verification system was in place, the 

HHS inspector general found that there were nearly 1 million income inconsistencies on exchange applications. Because individuals 

were able to self-attest to their income levels, there was little data 

before taxpayers’ subsidies were sent out the door. And if the data 

is wrong, thanks to the horrible poor implementation of the bill, 

hundreds of thousands of Americans could be hit with a nasty surprise when they do their taxes next year. They could be forced to 

pay back hundreds or even thousands of dollars. 

Recently, the Treasury Department spokesperson suggests that 

the ineligible subsidy that someone owes back to taxpayers could 

be capped. That is not how the law is written. Individuals who are 

not eligible, either because of improper income data or coverage 

from another source must repay the entire amount. The ACA tried 

to invent a system that would collect that information to prevent 

things like this from happening and improper subsidy, but guess 

what? It has proven so far to be too complicated and too burdensome. 

The administration has admitted time and time again, the law 

doesn’t work, delaying one provision after another or exempting 

special interests or politically-favored friends from the most onerous parts of the law. And while the mandate on local businesses 

is not being enforced, for 2014, the mandate on individuals to buy 

government-approved health care or pay a tax is. That certainly 

doesn’t sound fair to me. And that is why this White House has 

lost, in my view, the trust of the American people. 

Today’s hearing is an opportunity for CMS and IRS to begin an 

open and honest conversation with the citizens of the great country 

about their health care. And before I recognize Ranking Member 

Dr. McDermott for the purposes of an opening statement, I ask 

unanimous consent that all members’ written statement be included in the record. Without objection, so ordered. 

And I will recognize the Ranking Member Dr. McDermott for 5 

minutes for the purpose of his opening statement. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

Mr. Koskinen and Administrator Slavitt, welcome to a tale of two 

cities. Before we enacted the ACA 4 years ago, America’s 

healthcare system was dysfunctional and deadly. Forty-six million 

people were uninsured, and every year 45,000 Americans died because they lacked coverage. Many Americans who had insurance 

weren’t getting a good deal. Their health security was tenuous at 

best and prospect of bankruptcy due to medical bills was a real 

threat for far too many families. Insurance companies could hike 

up plan rates with impunity and without accountability. Insurance 

companies could refuse to cover people with preexisting conditions, 

and benefits dropped away from people who were most sick and 

needed health care the most. 

Meanwhile, Medicare costs were increasing at unjustifiable high 

rates, in part because the Federal Government was overpaying private insurance companies tens of billions of dollars through the 

Medicare Advantage program. Waste, fraud, abuse continued to 


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chip away at the trust fund as fraudsters and other questionable 

actors built beneficiaries. And the American taxpayer, while law 

enforcement like the tools to crack down on, fraud, in fact, had existed. Millions of seniors were falling into the Medicare prescription 

donut hole where coverage evaporated just when they needed it. 

Today, things are different. There is a real health security for 

millions of Americans due to ACA. Marketplaces across the country 

are backed up, running, ready for business. Eight million Americans signed up for coverage during the first open enrollment period, and the number of uninsured Americans has dropped by almost 10 million. Six million Americans have gotten tax credits and 

subsidies to help offset their healthcare costs. 

In addition, smart States have expanded Medicaid, which has increased coverage to millions more of the most vulnerable Americans. Thanks to the ACA, hardworking Americans have no longer 

been denied coverage because they have preexisting conditions, and 

their rates cannot be arbitrarily raised when they get sick. We are 

cracking down on fraud, waste and abuse, instead of targeting 

fraud after the fact. Federal regulators are increasingly preventing 

violations on the front end. 

Thanks to vigorous enforcement and the tools provided by the ACA, the administration has recovered more than $19 billion over 

the past 5 years. Payments to private insurance companies have 

been reduced to more appropriately reflect the cost of delivering 

Medicare while Medicare benefits have actually been increased. 

With free preventive care and coverage in the donut hole, millions 

of seniors have saved billions of dollars since the ACA was enacted. 

Now, have there been a few hiccups? Yes, there have been a few 

hiccups. You start something big, you always have a few hiccups. 

Talk to the Boeing Company. Implementations of the ACA have 

suffered due to Republican propaganda designed to confuse and 

scare the public, senseless repeal votes and harmful budgets cuts. 

And as the Commissioner from the IRS has testified in the past, 

the IRS is seriously understaffed making it harder for the agency 

to implement key parts of the ACA. 

Similarly, CMS has been denied needed resources, yet despite 

the Republican’s best effort at sabotage, the ACA is working. The 

law is saving money and lives. And my belief is that we are on a 

pace to guarantee health security for 32 million more Americans in 

the coming years and Medicare spending is at its lowest per-person 

growth in history. 

In light of the ACA’s success, I look forward to the day when Republicans do an about-face to accept their share of the responsibility in guaranteeing health security for all Americans. That 

means ending this senseless mission of sabotage and repeal. That 

means working with the Democrats to ensure all of our constituents benefit from all the ACA has to offer. 

And we look forward to your testimony. Thank you. 

Chairman BRADY. Thank you, Ranking Member Dr. McDermott. 

Today, we will hear from witnesses on two panels. John 

Koskinen, Commissioner of the Internal Revenue Service, and 

Andy Slavitt, Principal Deputy Administrator for the Centers for 

Medicare and Medicaid Services. 

Commissioner Koskinen, you are recognized for 5 minutes. 


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Mr. KOSKINEN. Thank you, Chairman Brady, Ranking Member 

McDermott and Members of the Subcommittee, thank you for the 

opportunity to appear before you today to update you on the work 

that the IRS is doing to fulfill our responsibilities under the Affordable Care Act. My testimony will focus on the significant efforts the 

IRS has been making to prepare for the 2015 filing season in relation to the premium tax credit and the individual shared responsibility provision under the Act. 

The IRS has already implemented a number of tax provisions 

under the Act, including the branded prescription drug fee, the tanning tax and the medical device excise tax. It should be noted at 

the outset that the vast majority of taxpayers will need to do nothing more next year under the Affordable Care Act than check a box 

on their tax returns because they have health coverage from one 

source or another. 

People who buy insurance through the marketplace and who 

qualify for the premium tax credit will have an extra calculation 

to make when they file. Most of them chose to have an advanced 

payment sent to their insurer during the year based on their family 

situation and estimated income for 2014. They will have to reconcile this advance payment on their return. We have already 

issued a draft of the new form they will use for this purpose, Form 

8962. 

If anyone paid for the insurance up front and claims to be eligible for the premium tax credit, they will calculate the amount of 

the credit they are entitled to and claim it on their tax return. The 

IRS has also developed the Form 1095–A and instructions. Beginning with the coverage purchased in 2014, the marketplace must 

issue the Form 1095–A to those who bought a policy through the 

marketplace. The data on this statement will verify the fact of marketplace coverage and facilitate the reconciliation process for the 

premium tax credit. 

The data will also be sent to the IRS and it will help us make 

sure that only people who qualify for the premium tax credit receive it. We are in the process of conducting tests with the Federal 

and State marketplaces to ensure that our systems can accept this 

data and will be ready to operate as planned when filing season 

opens next year. 

The work being done to prepare for filing season also involves 

the individual shared responsibility provision. This requires people 

to have insurance coverage for each month of the year, have an exemption or make a shared responsibility payment. A number of individuals will be exempt from this provision. 

For example, a person could be exempt for hardship reasons or 

if a gap in their coverage during the year was less than 3 consecutive months. Those who qualify for an exemption will provide information about it on a new form we have developed, Form 8965. The 

IRS has also been working to make sure that people understand 

how these two major ACA provisions may affect them at tax time. 

In helping people understand how the ACA might affect them, our 

primary goal is to make it as easy as possible for people to file 

their taxes next year. By providing this information in advance, we 

are also trying to answer as many questions as possible before the 


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filing season to limit the number of people who need to call us for 

help. 

For example, our Web site, IRS.gov, has a new section devoted 

to the ACA. We have also issued 16 healthcare tax tips and nine 

YouTube videos on ACA topics so far this year, with more on the 

way. And we have increased our use of social media, including 

Tumblr and Twitter to help get the word out. And yet, we still anticipate an increase in calls next filing season from taxpayers seeking assistance in regard to the ACA. 

We are concerned about our ability to meet this demand because 

of ongoing budget constraints and because of the possibility of additional increase in calls if Congress passes tax extender legislation 

later this year. We hope that Congress will pass any extenders as 

early as possible this year with as few changes as possible. 

I would note that the various ACA implementation efforts I have 

just described were accomplished in the absence of appropriated 

dollars requested for this effort. For fiscal year 2014, the administration requested $430 million for the IRS to implement these taxrelated provisions. Of that total, 300 million was needed for building and improving information technology systems and processes. 

No portion of the request was funded. Nonetheless, the IRS continues to deliver on this mandate given to us by Congress by refocusing the needed funding from other IT and agency priorities. 

Our concern with fiscal year 2015 budget request of about $400 

million for additional taxpayer services, if we had the funding, we 

would hire enough full-time equivalents to end up with a level of 

service at 80 percent. Without the funding, we expect that our taxpayer level of service may drop to as low as below 50 percent, 

which would mean that almost half of the people calling will not 

be able to reach a live assistant. We continue to work, as I said, 

to ensure that taxpayers in advance have as much information as 

possible to limit that load on our call-in system, but it is going to 

be one of our major challenges. 

This concludes my testimony, and I would be happy to take your 

questions. 

[The prepared statement of Mr. Koskinen follows:] 


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f 

Chairman BRADY. Thank you, Commissioner. 

Mr. Slavitt, welcome. 


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Mr. SLAVITT. Good morning, Chairman Brady, Ranking Member McDermott, Members of the Subcommittee. I am Andy Slavitt, 

Principal Deputy Administrator of CMS. I joined CMS 2 months 

ago from the private sector where I spent the last 20 years principally working with physicians, hospitals, health plans and employers on solutions to problems of healthcare costs, quality and access. During that time, I have been both an entrepreneur and have 

run a major division of one of America’s largest healthcare companies. 

In late October of last year, I began my involvement with the Affordable Care Act implementation when I joined the group of people helping the CMS team on the turnaround effort of the health 

insurance marketplace. I am pleased to appear before you today. 

Before answering your questions, I will briefly walk you through 

some of the progress of the Affordable Care Act to date and talk 

about our priorities for the coming period. 

There is growing evidence that the Affordable Care Act is working to make higher quality healthcare more affordable and accessible for millions of Americans. During the first open enrollment, 

millions of Americans selected a private insurance plan through 

their State or Federal health insurance marketplace and millions 

more have retained coverage on their parents’ policies or have 

newly qualified for Medicaid or CHIP. 

According to Gallup, the adult uninsured rate fell to 13.4 percent 

for the second quarter of 2014, a record low. In addition, we are 

seeing historically low growth and overall health spending measured at both the consumer level and the national level. This success is not being achieved by government policy alone, but in partnership with the private sector as insurers grow by competing to 

provide better quality and affordable services. Now, as we continue 

through the first year of marketplace implementation, we must 

build on that progress that is underway and continue to approve 

our execution based on the lessons from the last year. 

First, we are focusing on increasing the value consumers get 

when they come to the marketplace. Early evidence from States 

that have already published this information is indicating consumers will have more options and more competitive rates. According to a recent survey conducted across 16 major cities, premiums 

for the benchmark marketplace plan will actually decrease on average in the coming year. 

This is good news for consumers who are typically paying less 

than $100 a month for premiums for a policy in the marketplace. 

Most important is that this gives many families access to affordable, quality health care for the first time. According to a Commonwealth Foundation survey, two out of three newly-covered adults 

are saying they are now taking medicine and seeing doctors they 

couldn’t afford before. When you get underneath all the statistics 

about the uninsured rate dropping and rates remaining competitive, this is what counts. 

Next, we have heightened our focus on execution. Even as we 

continue to learn about new consumer needs, we are building out 

further automation and are working to improve interaction points 

with consumers and health plans. High on our agenda is making 

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viding scale to handle greater volumes of people, and completing 

back office functionality. 

How we execute has been a major area of focus from the Secretary on down. Our operating principles are straightforward: 

Clear accountability with a new marketplace CEO and clearer 

structure; ruthless prioritization, which has meant we haven’t done 

everything everyone has wanted, but have, instead, built in more 

time to test what we build; and transparency, even when things 

happen that we don’t plan on. 

The team at CMS is hard at work on implementation. This coming year will be one of visible and continued improvement but not 

perfection. We are in the early stages of the program newly serving 

millions of consumers and are still learning about the best ways to 

support their unique needs. We are making the right progress to 

have a successful open enrollment and continue to deliver on the 

promise of the Affordable Care Act to improve healthcare access, 

cost and quality for all Americans. 

Thank you, and I look forward to your questions. 

Chairman BRADY. Thank you, Mr. Slavitt. 

Commissioner Koskinen and Mr. Slavitt, I want to return to the 

theme I mentioned in my opening statement and that is trust. I 

think, my view, the American people have lost trust in the IRS for 

a number of reasons, including health care. And I think the disastrous rollout of HealthCare.Gov has created a lack of trust among 

the American people, as well as promises not kept. 

I do appreciate the work, Mr. Slavitt, you are doing, and there 

is a lot of it, to try to bring that site up to speed, more importantly, 

making sure we get the back end completed and right. Problems, 

obviously, remain with this. There are going to be more problems 

going forward into the second year. 

So my question to both of you, and it really isn’t a gotcha question, but in spite of all these problems, you know, how do you expect to, again, regain the trust of the American people when it 

comes to their health care? The ACA, in my view, through heavy 

subsidies is reducing the cost for some, but it is increasing the cost 

for others. And there is real concern back home from patients, providers and businesses about the Affordable Care Act. 

So what are you doing to make sure the second year of the ACA 

is not like the first year in that steps will be taken to regain the 

trust of the American people regardless of what party they are, 

that are just simply concerned about their health care? Commissioner. 

Mr. KOSKINEN. Well, we take, as I hope everyone knows, seriously the obligation to, as I say, try to make it as clear and 

straightforward and as easy as possible for people to determine 

what they owe and to be able to make those payments. As I have 

said on numerous occasions, we distinguish between the willing to 

pay and the unwilling to pay. And those willing to pay, even if they 

have difficulties, as I have said, don’t have to hire somebody off 

late night TV to come talk to the IRS. 

If you are willing to pay, trying to become compliant, we are anxious to work with you. We have installment agreement possibilities, 

we have ways of creating offers and compromise. With a focus on 

ACA, our role and the front-end rollout to providing income 


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verification data went very smoothly. The Inspector General said 

that it was virtually perfect. But we understand that there are 

going to be challenges with the first filing season, and that is why 

we are spending as much time as we are, starting last spring, trying to explain to the American people how the ACA affects them 

and what they need to do for filing. 

And as I said, one of the most important things for the public 

to understand is the vast majority of those filing next year out of 

the 150 million expected individual returns, 120, 125 million of 

them will simply check a box that they have coverage and that is 

all they will have to do. The other people filing, those who are either reconciling premium tax credits, seeking a credit, filing an exemption or dealing with the shared individual responsibility payment will have additional responsibilities when they file, and we 

are doing everything we can to get them that information. We have 

had tax preparer forms across the country with 10,000 tax preparers focusing on the ACA. 

But we take very seriously that, again, compliance with the Internal Revenue Code is a critical part of the tax system in the 

United States. We have a very compliant population. Our compliance rate is among one of the highest in the world. But to maintain 

that compliance rate, your point is well taken, people have to have 

trust and confidence in the system. They have to be confident they 

are going to get treated fairly no matter who they are. 

As I have said, one of my highest priorities is to try to make sure 

that people understand, when they hear from the IRS, it is not because of who they are, what organization they belong to, who they 

voted for in the last election, if they hear from us, it is about an 

issue in their tax return. And if somebody else had that issue, they 

would hear from us, as well. 

Chairman BRADY. There are questions about that. But let me 

ask you this: The IRS has three main tasks right now. One is to 

confirm income verification to those who are getting subsidies 

today; secondly, on January 1, delivering to American people Form 

1095–A that tells them what they need to do to file their taxes; and 

then to prevent having verification income placed before the second 

year premiums and subsidies are released. Where are you on each 

of those three? 

Mr. KOSKINEN. As I noted, last year in the rollout, we provided 

income verification information to 27 million inquiries. The inspector general reviewed it and said we were 100 percent accurate on 

the information we provided. It was primarily information about 

tax return information for 2012. 

Chairman BRADY. Of those you have the information for, but 

the inspector general said roughly 1 million of them had inconsistencies, were not complete applications. What has been going on 

with those? 

Mr. KOSKINEN. That was the review of HHS’s and CMS’s rollout. But in terms of the information provided by the IRS, the inspector general found that 100 percent of it was accurate. It was 

accurate to—— 

Chairman BRADY. So all the income from the IRS standpoint, 

everyone who is receiving subsidies today, their income has been 

fully verified? 


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Mr. KOSKINEN. Our role is to provide the data when the inquiry was made. We don’t play a role in terms of what they do with 

the data. We will have a significant role when people file—— 

Chairman BRADY. The IRS has a roll of income verification? 

Mr. KOSKINEN. When they file, we will obviously verify income 

as we do for the 150 million people who file, and that will determine the calculation that the taxpayer makes. It will determine 

whether they are eligible for the premium credit, how much of the 

advance payment they got and what reconciliation they have to 

make. 

Chairman BRADY. So again, today, of those receiving subsidies 

through the ACA that are helping them with their health care, the 

IRS says you can assure us all of those incomes have been verified 

at this time? 

Mr. KOSKINEN. We provided income verification when requested last year in the rollout. We will do it again in this year’s 

rollout. We have been advising taxpayers since last spring that 

whatever determination they made with the marketplace is about 

their circumstances. If there is any change in those circumstances, 

either in their family size or their income, they need to go back to 

the marketplace, because our concern is that everybody makes an 

estimate when you file your W–2s and your withholding. You are 

estimating what your income will be, obviously, for most people it 

changes to some extent. 

Chairman BRADY. Sure. 

Mr. KOSKINEN. So we are focused on and concerned that we 

don’t want people to have either gotten too small an advanced payment or too large of an advanced payment. 

Chairman BRADY. What I didn’t hear was a ‘‘yes’’ there. And I 

am hopeful we can get to the day where you can say yes, we have 

verified them. 

The 1095–A due in January, have you completed testing on that? 

Can the American public be assured when they are ready to do 

their taxes and get their refunds, that that form will be there in 

January? 

Mr. KOSKINEN. Right. We don’t provide that form. That form 

is provided by the marketplace. 

Chairman BRADY. But you provide the information for it? 

Mr. KOSKINEN. Happy to turn it over to my colleague. 

Chairman BRADY. Okay. How about preventing income 

verification to prevent eligible subsidies, ineligible subsidies in the 

future? 

Mr. KOSKINEN. As I said, in this rollout period for the second 

year, we will continue to provide income information to our system 

marketplaces and determine eligibility. But I would stress in the 

filing season, we will check, as we always do with everybody who 

files, their income will be verified. As I say, we have a very compliant population. They provide information about their income as it 

actually happened. What we are providing in the rollout is income 

information that can be used for verification for a previous tax 

year. 

But, again, that is what your, in this year’s rollout, it will be 

what your tax income information was for 2013, but it’ll be used 

for eligibility for 2015. And again, when you file for your 2015 


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taxes, you will have a different number almost no matter who you 

are as opposed to what you estimated. 

Chairman BRADY. Sure. What is the process for collecting overpaid subsidies to those who are not eligible? Do you have that process in place? 

Mr. KOSKINEN. That process will be our normal process in the 

sense that to the extent that your subsidy was too small, you will 

get a credit for that. For a lot of people in this income range it will 

be a refund. To the extent that your advance payment was too 

large, there will be a deduction either from your refund or an increase in the tax owing. 

Chairman BRADY. Sure. Now, I know how that process works. 

Is it fully in place to do that? 

Mr. KOSKINEN. It is, at this point, we are about to test our own 

systems. But I am assured, I have been meeting every 2 weeks 

since January with the IT people, with the program people and the 

business people, looking at exactly what we have to do to make 

that happen, and thus far, I have been assured that, while it is a 

challenge, we are on track to be able to do that. 

Chairman BRADY. Sure. For someone who, through no fault of 

their own, received a subsidy they weren’t eligible for, about what 

month in next year will they get the bad news that they owe taxes 

back to Uncle Sam? 

Mr. KOSKINEN. They will get that news whenever—shortly 

after—— 

Chairman BRADY. It would be bad news. They will get that 

news. 

Mr. KOSKINEN. They will get that news when they file, in the 

normal course. In other words, that news would be no different 

than any other bad news you might get if you turn out to owe 

taxes. So you will file a return. You will actually make your own 

calculation off the 1095 you get. You will determine whether you 

got too much and you owe additional tax or have a smaller refund. 

You will make that determination and you will file it with your return. Some people file in January. Some people file in April, and 

obviously, some extend their return into October. 

Chairman BRADY. So they may start the repayment as early as 

January of the coming year? 

Mr. KOSKINEN. It will all depend when they file. 

Chairman BRADY. Sure. 

Mr. Slavitt, can you address the issue, again, I know the serious 

work you are doing, both to address the problems in the past and 

try to both get the site working right and the back end right. There 

is no question about that seriousness. Can you address the trust 

issue at this point? 

Mr. SLAVITT. Sure. Mr. Chairman, thank you for the question. 

I have actually thought a little bit about this question. As I mentioned, I have worked for the government for 2 months, and interestingly—— 

Chairman BRADY. You are an old man. 

Mr. SLAVITT. I am an old man. Well, interestingly, the people 

that I work with at CMS and at the Department and across the 

government, the career people have been some of the most trustworthy people I have ever worked with, yet, coming from the priVerDate Mar 15 2010 21:05 Oct 20, 2016 Jkt 020995 PO 00000 Frm 00024 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\20995.XXX 20995

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vate sector, as you have said, there is a trust gap. And, you know, 

the way I understand that trust gap to be closed is the following 

ways: One is with transparency. Even when the news is bad, we 

need to be clear about what that news is, and I think this summer 

you have seen we have put out numbers, even worse-case numbers 

when there are challenges to help people with inconsistencies and 

so forth, rather putting those numbers out than other numbers and 

waiting for them to get better. 

Second, is accountability. That means being here, and my first 

several months I have been here as frequently as I need to be. It 

also means owning up to mistakes. I don’t think people expect us 

to be perfect. I do think people expect us to fix things when they 

don’t work and be very candid about them and be very accountable. 

And the third is straight talk. As much as possible, that means 

giving a direct and clear response when people are asking us very 

fair questions. It means saying ‘‘I don’t know’’ when we don’t know, 

even when we want to struggle to get back to people. There is no 

question that this implementation has a lot of pieces. It requires 

a lot of cooperation, and I think we can gain trust, I believe, in the 

work we are doing across government if we are clear in those categories. 

Chairman BRADY. Thank you, Mr. Slavitt. Again, I think you 

are trying to implement a poorly-designed, poorly-written, unworkable law; nonetheless, I think that approach of openness, transparency and straight talk will go a long way, frankly, towards restoring that trust. So thank you very much. 

Dr. McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. I would like to 

enter in the record the tax inspector general’s for tax administration’s report, ‘‘Affordable Care Act: Accuracy of Responses to Exchange Requests,’’ dated 3 July, 2014. I ask unanimous consent. 

Chairman BRADY. Without objection. 

[The Honorable Jim McDermott] 


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f 

Mr. MCDERMOTT. Both you gentlemen are listening to these 

questions, and I am trying—I am a physician, so I am thinking I 

have got a patient sitting in my office, and his name is John Smith 

and he has a wife named Mary, and their income is $70,000 between them. So that is their income last year. Do I understand that 

is the income that they bring forward, they say this is what I made 

last year, right? 


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Mr. KOSKINEN. That is correct. They provide that information 

to the marketplace. 

Mr. MCDERMOTT. Now, if during the year John and Mary both 

have done good work and they get a pay increase, let’s say they get 

$5,000 increase this year because the economy is recovering, so 

now they are making, not $70,000 together but $80,000, how does 

that affect their income verification from last year? 

Mr. KOSKINEN. It won’t change their verification. Their 

verification was made at the time they applied for the policy and 

if they applied and were eligible for the tax credit. So again, what 

I said in response to the chairman’s question, one of our concerns 

has been since the spring trying to remind people, if you were in 

that fortunate situation and you now expect to earn more money 

than you originally expected with your income verification, you 

should report back to the marketplace and adjust any advance payment you are getting, because to the extent you qualified and the 

payment is going to the insurance company, if your income goes up, 

the amount of that payment will go down. 

And if you can adjust it during the course of the year, it means 

you will be closer to the right number when you file a return. If 

you don’t make the adjustment during the year, your premium tax 

credit will be higher than it should’ve been and you will have to 

actually make that adjustment on your tax return. 

Mr. MCDERMOTT. So the individual, when they get a pay increase, has to go to their employer and say—or who do they go to 

and say, I want to adjust because I am now making $35,000 instead of $30,000 or whatever? 

Mr. KOSKINEN. They go back to the marketplace where they 

purchased the policy. 

Mr. MCDERMOTT. Back to the exchange? 

Mr. KOSKINEN. Back to the exchange. 

Mr. MCDERMOTT. Not to the insurance company but to the exchange? 

Mr. KOSKINEN. To the exchange. The exchange is what determines how much of a premium payment, advance payment goes to 

the insurance company. 

Mr. MCDERMOTT. And they have to do that if—— 

Mr. KOSKINEN. Mr. Slavitt, will correct me if I’m wrong. 

Mr. SLAVITT. You got it right, Commissioner. 

Mr. MCDERMOTT. If they get it anytime during the year, they 

have to make a correction that month to be able to take care of it 

at the end of the year or—I thought that was a fixed figure, that 

their income for this year is $70,000, and if they get an extra 

$10,000 that is next year’s income. 

Mr. KOSKINEN. No. What happens is the estimate was made 

last fall. We provided income verification for the tax year 2012. 

Mr. MCDERMOTT. Which is $70,000 for this couple. 

Mr. KOSKINEN. Assume that was $70,0000. Now we are in 

2014 and they are going to make $80,000. The premium advance 

payment was made on the basis of the $70,000, but your tax return 

for this coming filing season will be based on what you actually 

earned in 2014 and what you actually earned in 2014 will be reconciled as to what your premium tax credit should be and what the 

advance payment should have been. So if your income goes up this 


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year, which is a terrific situation, your eligibility for the premium 

tax credit will decline to some extent. 

Mr. MCDERMOTT. So anybody whose pay goes up this year and 

is getting subsidies will have a deduction or have a reduction in the 

subsidy at the end of the year? 

Mr. KOSKINEN. Correct. When they make their reconciliation, they estimated they were going to make $70,000, turned out they 

made $80,000, on their calculation on the forms we provided they 

will calculate what their premium for 2014 premium tax credit 

should be, and if the advance payment turned out to be larger because their income had gone up, they will make an adjustment on 

their return. 

Mr. MCDERMOTT. So how many people is this going to affect? 

How many people’s income go up during the year? 

Mr. KOSKINEN. I am not sure anybody knows. We expect of the 

8 million people covered, we are probably going to have 3 million 

or 3.5 million returns because you have families in that 8 million. 

And of those 3 million, 3.5 million, any number of them are likely 

to have had a change in family circumstances, a change in income. 

The income may have gone up, it may have gone down. I don’t 

think there is any way that I know off the top of my head to tell 

you what percentage will be affected. 

Mr. MCDERMOTT. Suppose you have some problems—I guess 

my time is just about up—but if they have had some problems at 

the job and their income has now been reduced by $5,000 apiece, 

so they now are only making $60,000. 

Mr. KOSKINEN. Again, if they go back to the marketplace during the year, their advance payment will be adjusted in light of the 

new estimate of what they are actually going to make during the 

year. If they don’t go back to the marketplace, when they file next 

spring, they will do a calculation and it will show that their premium tax credit amount they are eligible for is actually larger than 

the sum of the advanced payments that went to the insurance company and they will have an increase in their refund. 

So there is no penalty for not going back to the marketplace, but 

if you go back to the marketplace, it will be able to make an adjustment that gets you closer to what your actual tax return is going 

to look like next spring. 

Mr. MCDERMOTT. Thank you. 

Chairman BRADY. Thank you, Dr. McDermott. 

Mr. Johnson is recognized. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Good morning, sir. You know, you all promised Americans under 

the Affordable Care Act that they could keep their health plan and 

their doctor at a lower cost. But as my constituents are seeing, 

those promises are just empty promises. They are outright lies. The 

reality is that millions of Americans have lost their health care and 

are being forced by this Act to get plans with higher out-of-pocket 

costs and fewer doctors. 

And as you know, we are less than 4 months from the tax filing 

system, and unfortunately, Americans will face yet another hardship under Obamacare, because you can’t file a simple tax form 

anymore. You’ve got to report your health care on it and you can’t 

do that on a simple form. Is that true? In other words, will folks 


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who are forced to pay more for health care and lose their doctor 

now be forced to file a more complicated tax return? 

Mr. KOSKINEN. Those who actually have gotten a premium tax 

credit will have a calculation they have to make for it. As I say, 

the vast majority of Americans are going to have, you know, we estimate 120 million, 125 million Americans are going to be affected 

by the Act by simply checking a box on their return. But anyone 

who actually has purchased a policy and is either claiming the premium tax credit or reconciling the advance payment they have already gotten, will have a more complicated process as they will 

have to make that calculation on their return. 

Mr. JOHNSON. So they can’t file a simple form? 

Mr. KOSKINEN. So they will not be able to file the simple form. 

Mr. JOHNSON. So that is a hardship on America, isn’t it? 

Mr. KOSKINEN. It’s part of the obligation, if you have got premium tax credit advance payment, then you have to reconcile it at 

the end of the year. 

Mr. JOHNSON. Okay. Mr. Slavitt, under President Obama our 

national debt has reached a record high of almost $18 trillion. So 

one of the most important things we can do here in Washington is 

get the fiscal House in order. In April, the CBO and the Joint Tax 

Commission estimated that the Federal Government will pay $17 

billion in 2014 for health insurance subsidies and over $1 trillion 

from 2015 through 2024. The GAO testified in a July hearing that 

they had obtained numerous policies through the Federal exchange 

using false identities, including made up or nonexistent Social Security numbers. 

Then the HHS Office of the Inspector General released a study 

of internal controls at select insurance exchanges, that report found 

that those exchanges were unable to validate the Social Security 

numbers and other eligibility requirements. Considering that nearly 87 percent of those who enroll in a plan through the Federal exchange receive a subsidy, that is a major concern. 

Can you respond to these findings and tell us exactly what you 

are doing about it, and are you personally following that issue? 

Mr. SLAVITT. Yes, Congressman Johnson. So there is a fairly 

extensive process when someone fills out an application to apply to 

the covered under insurance marketplace. For a typical family of 

four, they provide 21 pieces of information that we independently 

verify through our computer systems that link up to various government entities. If even one of those pieces of information, of those 

21 pieces of information we cannot verify, for whatever reason, 

then it is our obligation to seek physical documentation from the 

individual to make sure that, in fact, what they are reporting, 

when this pertains to their income level, whether it pertains to 

their citizenship status or whatever the information happens to be, 

that we get verification. 

We have been contacting people extensively, in many cases with 

10 or more outreaches, to ask them to submit the documentation 

so that we can be sure that all the information is coming in as accurate. It is, as you can imagine, a fairly extensive process. It is 

our first year doing it. It’s the first year consumers have had to do 

it, and we are being, I think, fairly open about the fact that there 


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are numbers of people who have inconsistent information that we 

have to match, and we are making that level of progress. 

Mr. JOHNSON. Thank you. 

Thank you, both, for being here. 

Thank you, Mr. Chairman. 

Chairman BRADY. Thank you. 

Mr. Thompson, you are recognized. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

Thank you, both, for being here. 

Mr. Koskinen, I want to follow up on Mr. Johnson’s question 

about the extra hoop that you have to jump through if you receive 

a subsidy. There isn’t an easier way to do this? You have to elevate 

them to a completely different process for filing? 

Mr. KOSKINEN. It is a calculation. In other words, they have 

applied, as I discussed earlier, they have applied based on an estimate of what their income will be for 2014, those who have gotten—— 

Mr. THOMPSON. So can this be an extra box to check or something on the short form? 

Mr. KOSKINEN. No, because you actually, if you got the premium, advance payment has gone to your insurance company, you 

have gotten that benefit. And what we need to do at the end of the 

year is reconcile—you need to do as a taxpayer is reconcile how 

much of an advance payment have you gotten compared to what 

you are actually entitled to. And what determines what you are entitled to is how much you actually made this year as opposed to 

what you estimated when you enrolled. 

Mr. THOMPSON. Let me ask a different way. Is this going to be 

an significant enough change to trigger some sort of elaborate filing, or is it something people can still do on their own? 

Mr. KOSKINEN. This should be something that people can do. 

The form, is the usual form. It is simply a calculation of what you 

earned, what you are eligible for, what you actually received. You 

will have the 1095–A that will give you the information you need 

to fill out that form. The vast majority of Americans—— 

Mr. THOMPSON. Dr. McDermott had asked about individuals 

who either get a raise during the year or get a reduction in salary 

during the year and you explained—and it sounded to me like a 

pretty complicated process that these folks are going to have to go 

through. But are you doing something to educate people, to let 

them know that if they do have a change of income that they are 

going to have to proactively do something on their forms? 

Mr. KOSKINEN. Yes. As I noted, we have been talking about 

this in our public releases since the spring. Our Affordable Care 

Act site on the Web site has this information highlighted. We have 

been trying to continually remind people to make that adjustment, 

although it is not a requirement. If they don’t make the adjustment, they make more money. When they make the calculation it 

will be a simple calculation. This is what I was entitled to and this 

is what I got. 

Mr. THOMPSON. I suspect that most folks after they sign up for 

health care aren’t going back to review the Web site. They figure 

that they have done that and they are getting on with the other 

things in their life. So I don’t know that merely putting something 


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on the Web site is going to be enough. And it seems to me there 

ought to be some way to better educate folks what they may have 

to face in this process. 

Mr. KOSKINEN. Well, I am not a user of Twitter or Tumblr, so 

I can’t tell you the reach of it, but we have YouTube videos, we 

have information that is going out on all the social networks and 

Web sites. As I say, we have talked to tax preparers across the 

country all year long about this. 

Again, to the extent they go back to the marketplace and make 

the adjustment, it means they will be closer in their calculation. 

But one way or the other, whatever they do—— 

Mr. THOMPSON. Somebody ought to be thinking through this. 

I am not saying you are not. But somebody ought to be thinking 

through this, because when this hits, I don’t think it is going to be 

enough to say I am not a user of Twitter or whatever. I think we 

need to figure out how to better educate folks going into this. 

Mr. KOSKINEN. Right. We are continuing to do it. We are doing 

the best we can. We are open to other suggestions, as I say. We 

have got what I call a full court press trying to get full information 

out to people, not only about the adjustments, but about how the 

calculation is made when they file their returns. 

Mr. THOMPSON. Mr. Slavitt, you have got pretty extensive private sector experience working in the technology industry, including working on components of HealthCare.Gov. And you now, in 

your current position, you are leading efforts related to marketplaces and other technology innovations. And given the issues that 

HealthCare.Gov experienced last year, which I add that you helped 

to fix, I am glad that you are there given your experience. It seems 

to me you probably know the right questions to ask. 

Looking forward to November 15, the next enrollment period, 

what are the markers or the benchmarks you are looking for to 

prove the system is ready for open enrollment? 

Mr. KOSKINEN. So Congressman, we are in a more favorable 

situation when we have a functioning Web site that is already up 

and running. Having said that, we have new functionality that 

needs to be added for open enrollment next year. So let me give 

you a little bit of a feel for how we are approaching that. First is, 

we are rolling out new functionality and adding it over the summer 

as opposed to all at once, and so that helps us ensure that we can 

put things into the marketplace and test them. 

Second thing, and I know we are over time, is that we have built 

a much longer period of time in for testing, because when software 

is built, people need to use it and pound on it before it can be rolled 

out. We are more fortunate this year in that we have more time. 

Having said all of this, I am a realist and we will not get it perfect, 

but we have, I think, the right processes in place to make it as 

good as it should be. 

Mr. THOMPSON. Thank you. 

Chairman BRADY. Thank you. 

Mr. Roskam, you are recognized. 

Mr. ROSKAM. Thank you, Mr. Chairman. 

Commissioner, the Congressional Budget Office estimates that 

there is going to be $1 trillion in Obamacare subsidies over the 

next 10 years, and that is just a huge pool of money, as you know. 


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You said that those who simply check a box are going to be free 

from a level of scrutiny, which suggests that there is going to be 

a significant number of people who are going to be subject to scrutiny in terms of income verification and so forth. And it seems to 

me like the IRS is just poised to go swimming in a huge pool of 

money. 

So the question is, what are the things that are happening 

proactively to prevent the next Lois Lerner, Lois Lerner 2.0, from 

looking out of a landscape with a high level of discretion, to be able 

to say, you know what, we are going to make inquiries here and 

we are going to make inquiries there and we are not going to make 

inquiries over here. And you see where I am going. 

Mr. KOSKINEN. Right. 

Mr. ROSKAM. And there is a high level of suspicion. 

And also, I mean, you said you are meeting with IT people every 

2 weeks, and I accept at face value that you need to meet with IT 

people every 2 weeks, but are these the same IT people that can’t 

find Lois Lerner’s emails and can’t deal with hard drives? And so 

what level of confidence does the American public have as they are 

looking out and they are saying to themselves, holy Moses. I mean, 

when this institution, the Internal Revenue Service, reaches its 

long arm into our lives and grabs somebody by the neck and shakes 

them up, it gets people’s attention and it can be incredibly damaging. 

Now, you know, the administration last year said we are basically going to do an honor system because it is too overwhelming. 

So what is the level of confidence that there is not an environment 

where Lois Lerner 2.0 is able to emerge? 

Mr. KOSKINEN. You have asked a set of questions, and let me 

try to deal with all of them. First of all, and we are trying to remind everybody of this, the inspector general who filed a report 

about the use of improper criteria said, to fix the problem there 

were a series of nine recommendations that the IRS should adopt. 

We have adopted and implemented all of those recommendations. 

In our normal exam process, there is no way that any individual 

can single out any taxpayer for review. 

Mr. ROSKAM. Why not? 

Mr. KOSKINEN. Because there is a review process. 

First of all, the first cut of the selection is made automatically 

by computer. To the extent, then, exams are decided, there are 

three people who meet and have to approve that; so that the system is designed and has been for some time so that no one can pick 

out an individual taxpayer for review. We have buttressed that 

with all of the recommendations the IG said we should do. 

Mr. ROSKAM. Wasn’t that true, though, in the (c)4 situation, 

where, I mean, look these are (c)4 applicants that rise to a level 

of scrutiny. They were presumably chosen by a computer by definition because they were (c)4 applicants, and then Lois Lerner makes 

decisions about, well, we are going here and we are going there. So 

you have got now another computer that is going to be deciding 

there is a threshold that the program presumably pops people up, 

and presumably those are people by your own definition who 

haven’t checked the box. 

Mr. KOSKINEN. Right. 


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Mr. ROSKAM. So now they are in open country. 

What prevents an IRS employee from saying, I am going after 

you? 

Mr. KOSKINEN. First of all, and I am waiting for the rest of the 

investigators to be completed, there is no evidence thus far that 

anybody picked an individual organization to be picked out. There 

were improper criteria to select an entire set of organizations. No 

individual organization was targeted. 

Mr. ROSKAM. You are not defending Lois Lerner? 

Mr. KOSKINEN. I don’t know her, and I am not defending her. 

Mr. ROSKAM. I wouldn’t give her eye contact, but go ahead. 

Mr. KOSKINEN. What I am trying to defend is that whatever 

the recommendations were the inspector general thought were necessary to fix the problem have been adopted, have been implemented, and I am confident that if people haven’t learned any 

other lesson in the last year and a half they have learned this lesson, that we need to provide guarantees to the American public 

that they can be confident that whether it is the Affordable Care 

Act or any other part of the implementation of the Tax Code, if 

they hear from us, they are hearing from us for something in their 

return and that they have not been selected arbitrarily. If someone 

else had that same issue, they would hear from us as well. 

Mr. ROSKAM. Commissioner, my time is waning. Let me just 

impress upon you one point, that I know you are understanding 

what I am saying, but just unambiguously, this committee has a 

high level of scrutiny and a high level of expectation that the administration by the Internal Revenue Service of all elements of the 

Tax Code are unbiased and impartial, and it is a huge background 

to overcome because the American public is burned, and they are 

not going to put up with it. 

And so with that, I yield back. Thank you, Mr. Chairman. 

Mr. KOSKINEN. I would just say, we share that view with you; 

that is, that the American public deserves and needs to be confident that the IRS is a tax administration agency without a political agenda, without political connections. And we stand ready to 

work with this committee and every one of the members of this 

committee to do whatever we can to make sure that that happens. 

Chairman BRADY. Thank you. 

Mr. Kind, you are recognized. 

Mr. KIND. Thank you, Mr. Chairman. 

I want to thank our guests here for your testimony. And I would 

like to just echo Mr. Roskam’s sentiment, Mr. Commissioner. We 

do expect impartiality and fairness from the IRS. I feel more confident with you in the seat right now with the overview and following the recommendations of the IG report that you have followed up, and I commend you for those efforts. But naturally, there 

is some credibility that has to be restored right now and we look, 

you know, forward to working with you in order to do that. 

Now, let’s just back up and keep today’s testimony a little bit in 

context. Commissioner Koskinen, you, again, in your opening testimony indicated that the vast majority of Americans were merely 

needed to just ‘‘check a box,’’ and they are going to satisfy what 

they need to do as far as showing if they have got health insurance 

in their lives. Is that correct? 


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Mr. KOSKINEN. Correct. 

Mr. KIND. And can you break that down as far as percentagewise, the number of Americans that are filing who just merely have 

to check the box and not do anything further? 

Mr. KOSKINEN. Because it is the first year of filing, it is hard 

to know with precision, but our best estimate is that out of 150 million returns we will process, 125 million will simply check a box. 

Mr. KIND. And that won’t require a separate IRS form to do? It 

is built into the normal—— 

Mr. KOSKINEN. The normal 1040 will have a box. I have looked 

at the line. 

Mr. KIND. If you are a recipient of some tax credit in the exchanges and that, there is a separate form for them to have to fill 

out in order to match up income verification for that purpose, 

right? 

Mr. KOSKINEN. That is correct. 

Mr. KIND. That won’t be on a 1040–EZ; that requires a separate 

form? 

Mr. KOSKINEN. That requires a separate form that we have already provided, and we are trying to educate preparers and everyone else about how to fill it out. 

Mr. KIND. Mr. Slavitt, now, some of us had a recent meeting 

with Secretary Burwell, and she was trying to put the numbers in 

context, too. There is really two kind of reconciliations that are 

going on right now: One is income verification, but one is also citizenship verification, too. And she indicated that on the citizenship 

side there was initially 970,000 discrepancies or so, but that number has been drastically reduced to about 220,000. Does that sound 

right to you? 

Mr. SLAVITT. Right. So I think, in August we had sent out 

about 310,000 letters informing people who we have had contact 

with on a number of occasions that we needed to receive documentation from them in order to maintain their policy in the marketplace. Since that time, and I believe the estimate that Secretary 

Burwell gave you was, since that time, as deadlines have tended 

to do for us, we have seen an influx from individuals, and so I 

think that that number has been dropping below 310,000 pretty 

meaningfully. 

Mr. KIND. And probably safe to assume that number is going to 

continue to go down as more people respond to the inquiries sent 

to them. Is that right? 

Mr. SLAVITT. That is right. 

Mr. KIND. Now, some of this might be a little confusing for 

some. Is there a role for the navigators to play in order to help 

these individuals to send the proper documentation in order to satisfy the requirements? 

Mr. SLAVITT. Well, we found in the first year that in-person assistance of a variety of types, navigators certainly, but also agents 

and brokers and others have a tremendous role to play in helping 

people through, whether it is that issue or even some of the issues 

that Commissioner Koskinen has addressed. 

Mr. KIND. Now, is that going to be true for income verification, 

or are there some privacy concerns that attach to that? 

Mr. SLAVITT. Regarding navigators, or regarding—— 


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Mr. KIND. Yeah, the role of navigators, someone assisting the individual to get proper documentation. 

Mr. SLAVITT. Yeah, I think that level of assistance is available 

to most people and they should take advantage of that. They also 

can call our call center directly and we can walk people through 

that process. 

Mr. KIND. You indicated that on average, the typical individual 

is getting about ten touches from you in order to match up the data 

that you have with what they are submitting? 

Mr. SLAVITT. That has been true for citizenship and immigration status, and for other categories it has been five or six. 

Mr. KIND. And what form of information are the individuals getting? Is it more detailed? It is not just a letter saying, hey, something doesn’t match up, or is it this is what you are missing? Can 

you—— 

Mr. SLAVITT. So we have tried reaching out to them with letters. We have also had the health plans directly reach out to them 

with some success, as well. And then where we haven’t had success 

we have used the telephone, we have called them, and we have attempted to walk people through them. We understand that for a 

lot of people, this is their first time through a process like this, and 

sending information to some place that they are not familiar with 

isn’t always the most comfortable thing. 

Mr. KIND. Commissioner Koskinen, back to you again, the income verification information you are looking for is really no different from what a typical taxpayer may have to do. If something 

doesn’t match up with their income that they are submitting 

through the W–2 form or whatever, such as if they are missing a 

1099 or something, they will get a notification from the IRS saying, 

hey, something doesn’t match up here. Is that right? 

Mr. KOSKINEN. That is correct. Although, initially, we expect 

that, as with all tax returns, people will make that calculation 

themselves. As I say, when we all do our withholding, we make an 

estimate as to what we are going to end up owing and it always 

is a different number at the end and it is the same way here. 

Mr. KIND. And that has been going on for years and we haven’t 

seen the demise of western civilization with that practice, have we? 

Mr. KOSKINEN. Not yet. 

Mr. KIND. Okay. Thank you. Thank you, Mr. Chairman. 

Chairman BRADY. Some would argue differently, Mr. Kind. 

Dr. Price, you are recognized. 

Mr. PRICE. Thank you, Mr. Chairman. I want to thank the witnesses as well for the information. I have found much of this fascinating. 

Our friends on the other side of the aisle seem to be waking up 

to the fact that it is a complex program that it is requiring things 

of Americans and patients across this country that haven’t been required before and may be significantly problematic. In fact, the 

CEO of H&R Block, Mr. Koskinen, says that Obamacare would add 

significant complexity to the tax system, and I think that the questions from Mr. McDermott and Mr. Thompson actually outlined 

that. And Mr. Kind put the punctuation point on it, and that is 

that anybody who fills out their form today, tax form today, 1040– 

EZ, simple form, good thing for consumers, good thing for citizens, 


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but if they have any change in their work status, any change in 

their income, will not be able to fill out the 1040–EZ. Is that correct? 

Mr. KOSKINEN. No. That is an overstatement of the situation. 

They will not be able to use the 1040–EZ if they have received an 

advance payment on a premium tax credit. A lot of people use the 

1040–EZ who are going to be part of that 125—— 

Mr. PRICE. But those 25 million that you estimate, I suspect is 

going to be greater than that, because millions, tens of millions, if 

not over 100 million Americans see some change in their income—— 

Mr. KOSKINEN. Right. 

Mr. PRICE [continuing]. Throughout the course of the year. The 

fact of the matter is that they are not going to be able to use the 

form that they used before, they will be required to use another 

form. 

Mr. KOSKINEN. That will be—— 

Mr. PRICE. In fact, if they go to the site that you identify, that 

is not even done automatically, right? If—— 

Mr. KOSKINEN. Right. 

Mr. PRICE. If they go to the marketplace, as you call it, go to 

the exchange now and they say, my income just went up, is that 

automatic? 

Mr. KOSKINEN. No. First of all, I would like to make it very 

clear: Millions of people use the 1040–EZ and they are going to 

continue to use the 1040–EZ. The people who are going to actually 

have to make a separate calculation are only those who actually 

get advanced premiums on the premium tax credit or are applying 

for the premium tax credit. 

Mr. PRICE. Millions of folks. Is it automatic when they go on the 

site and identify that they have in—either increased their income 

or decreased? Isn’t that a manual process now? 

Mr. KOSKINEN. I don’t know what happens on the Web site, so 

Mr. Slavitt would have to tell you. 

Mr. PRICE. Is that a manual process at this point? 

Mr. SLAVITT. If someone has a change in status of any variety, 

income, of several varieties, they have children, a divorce, a loss in 

the family, we ask them to come back to the Web site and update 

their information. 

Mr. PRICE. Is that a manual process now or is that an automatic process? 

Mr. SLAVITT. It is automated. Once they update it, it is automated. 

Mr. PRICE. I know you have only been with them for 2 months 

now, and I won’t hold you to account on that, but please go back 

and check. 

Mr. SLAVITT. Okay. 

Mr. PRICE. Let me get some basic information, Mr. Slavitt. How 

many folks are enrolled through the exchange? 

Mr. SLAVITT. As of the end of the last open enrollment period, 

there were—I think the number was some 8 million people that 

had enrolled in coverage. 

Mr. PRICE. How many? 

Mr. SLAVITT. Some 8 million had enrolled in coverage. 


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Mr. PRICE. 8 million. How many of those folks had insurance 

coverage before? 

Mr. SLAVITT. I don’t know. 

Mr. PRICE. You don’t know. 

Mr. SLAVITT. I don’t. 

Mr. PRICE. HHS doesn’t know how many folks had coverage before but now were forced into the exchange? 

Mr. SLAVITT. We do know that we have seen the uninsurance 

rate drop significantly in the second quarter. I think that tells us 

that there are a lot of people through the exchanges or through 

Medicaid—— 

Mr. PRICE. Wouldn’t it be helpful to know how many had insurance before to see whether or not the system’s working? 

Mr. SLAVITT. Sure. We also—that is fair. We also don’t want to 

overburden people by asking them needless questions when they 

are applying for insurance. 

Mr. PRICE. Well, we ought to poll the American people as to 

whether or not you are asking them needless questions. 

How many folks had coverage through the workplace before the 

Affordable Care Act went into effect? 

Mr. SLAVITT. I don’t know the exact number. I believe some 96 

percent of people who have coverage have it through their workplace. I haven’t seen—— 

Mr. PRICE. 159 million sound somewhere in the range? 

Mr. SLAVITT. Sounds—sounds right. 

Mr. PRICE. How many folks have coverage through the workplace now? 

Mr. SLAVITT. I haven’t seen an updated study. 

Mr. PRICE. Well, I would urge you to look. Again, I know you 

have only been there for 2 months and it is a lot of numbers, but 

that number has gone down. 

Mr. SLAVITT. We will do, Congressman. 

Mr. PRICE. So the place where folks have been getting their coverage that has worked for them for years and years and years has 

decreased the numbers of individuals. 

You talk about costs going down. In fact, costs are actually going 

up, by HHS’s own admission. Average of 7 percent increase in premiums in the next year. With the higher deductibles that folks are 

having, paying—the deductibles for many people now are between 

$4,000 and $12,000 a year. Let me suggest to you that an individual making $50,000 a year, a family making $50,000 a year who 

has a $6,000 to $8,000 deductible, that is not a person who can afford a $6,000 to $8,000 deductible. That is how you have shoved 

everybody into these programs. 

The increase in bad debt in physician’s offices across this country 

in the exchange is up 60 percent, 60 percent. Those folks are going 

to have to figure out what to do, and it is not going to be able to 

continue to provide coverage for people. 

I want to touch on identity theft. You all had a hacker break into 

the system, correct, in July? 

Mr. SLAVITT. That is correct. 

Mr. PRICE. When did you know that? 

Mr. SLAVITT. August 25th. 

Mr. PRICE. When did you notify the Federal authorities? 


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Mr. SLAVITT. I believe it was within 10 days or so of that. 

Mr. PRICE. When did you notify the insurers that were participating in the exchange and covering those lines? 

Mr. SLAVITT. At the very same time. There was no impact to 

the insurers, but at the very same time. 

Mr. PRICE. The fact of the matter is, as you should know, is that 

the insurers found out about this through the press, through the 

press. If we are going to protect people’s personal information, especially as it relates to health care, and not notify those individuals 

and not notify the insurers who are trying to protect as hard as 

they can the information that they have, this is unconscionable. 

This is what the American people are concerned about. 

Mr. SLAVITT. Congressman—— 

Mr. PRICE. I think that we have underscored once again the 

challenges with this law, and urge you to get the facts, look objectively. You spent a significant amount of time in United Health 

Care and Optum. You—talk to those folks. I have talked to them 

recently. The fact of the matter is what CMS is doing right now, 

what HHS is doing right now with the ACA isn’t working in the 

real world. I would urge you to talk to your former colleagues. They 

will shed a whole lot of light on what is going on. 

Mr. SLAVITT. Congressman, thank you. You want you to know 

I did personally call a representative of the Insurance Association 

to inform them. 

[The prepared statement of Mr. Slavitt follows:] 


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Chairman BRADY. Thank you, Dr. Price. 

Mr. Pascrell, you are recognized. 

Mr. PASCRELL. Thank you, Mr. Chairman, very much. 

Look, Commissioner, you know what is going on here. If you 

can’t shoot the dog, starve it. That is what this is all about. In the 

budget itself, in the budget itself, the House bill as amended for 

the appropriations, the total IRS funding in 2015 would be about 

$9.8 billion, which is 19 percent below 2010, when the ACA became 

the law of the land. So we are—in every manner, shape or form, 

in every hearing that we have had here, and I have a great respect 

for every Member of our side as well as the other side, but we 

know what it is: Starve it and it will go away, it will disappear, 

it will die. 


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I mean, there are some great things that are happening in the 

ACA, even to—its detractors know that. They won’t admit it. They 

will not admit it. 

So we know how many people we have enrolled, and we know 

how many people have received tax credits. We are trying to verify 

all of them, which is true. You want to know the mess we had 10 

years ago on the prescription drug bill? Nobody wants to talk about 

that. This is half a story you get here, and there is a reason: We 

are going to starve the dog. We are not going to shoot it, because 

they haven’t found the way to do that, either. And, again, 6 million 

more people are enrolled in Medicaid. Or the Children’s Health Insurance Program, you don’t want to talk about that, do you, what 

you have done to it? 

So the United States uninsured rate continues to decline. It is 

about 13.4 percent now. Correct me if I am wrong, gentlemen. 

Mr. SLAVITT. That is correct. 

Mr. PASCRELL. Thank you. Before the ACA, many people were 

paying for plans that didn’t provide them with the coverage they 

needed. Some of these people that have lost their coverage are better off now because they had to go into the exchange and they got 

better plans. Let’s talk about that. And for those who are falling 

through the cracks, we have an obligation to them, too. Nobody’s 

denying that. 

I like to talk about this at town meetings. I hope you do, too. And 

I am sure you will be objective and tell the good with the bad. 

Americans are denied coverage for pre-existing conditions and insurance companies arbitrarily increase their premiums to the point 

where they can’t afford it. You talk about 7 percent increase. I will 

tell you what the increases were for each of the last 5 years. 

My Republican colleagues refuse to acknowledge any benefits 

that have resulted from this law. And it is not a perfect law, Mr. 

Commissioner. We have never passed a perfect one, believe it or 

not. 

Unlike the Part D Medicare prescription drug plan, where Democrats who voted against the bill came together and helped educate 

and enroll seniors, I voted against that, but I went back to my district to initiate those folks, the seniors, with what this plan was all 

about, they have done nothing to do that. They haven’t cooperated 

in the least. 

So my question to you is this, Mr. Commissioner. And thank 

you—I was here the last time you were grilled, and you handled 

it very, very well, you kept your cool. Continue to keep your cool, 

Mr. Commissioner. 

My Republican colleagues are fond of attacking the Obama administration at every step of the Affordable Care Act’s implementation. They have expressed outrage over the delays, but at the same 

time, refused to give the agencies the funding. That is a big cut, 

20 percent. The House appropriations bill for fiscal year 2015 that 

would set the funding at 19 percent below what it was 4 years ago. 

Mr. Commissioner, can you explain how budget cuts have affected your agency’s ability to implement the ACA? 

Mr. KOSKINEN. We view, as I have said on numerous occasions 

in the past, implementing the Foreign Account Tax Compliance 

Act, FATCA, and the Affordable Care Act are statutory mandates 


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that we have an obligation to implement, so whatever else it means 

we are not doing, we are going to implement both Acts this year 

in the filing season. As I noted, by not providing the $430 million 

for fiscal 2014 or the $450 million for fiscal 2015, it simply means 

that we have to take that money from the other places we have 

available. 

Mr. PASCRELL. So therefore—— 

Mr. KOSKINEN. It is either enforcement, taxpayer services, or 

continued improvement in—— 

Mr. PASCRELL. So you are moving dollars around? 

Mr. KOSKINEN. We have to move the dollars around. 

Mr. PASCRELL. The Affordable Care Act, Mr. Chairman, so far 

has had little impact on the insurance people get through their 

jobs, with roughly the same share of employers offering coverage 

in 2014 as last year, to correct the record. 

Chairman BRADY. Thank you, Mr. Pascrell. 

Mr. PASCRELL. May I just finish my point? 

Chairman BRADY. Very quickly. 

Mr. PASCRELL. As you have allowed other folks to. I appreciate 

that. 

Chairman BRADY. No. We have been—I tell you what, we have 

been very close to time on everybody. And certainly finish. 

Mr. PASCRELL. And you have been very, very charitable in—— 

Chairman BRADY. Thank you, sir. 

Mr. PASCRELL [continuing]. With all of us. Thank you. 

The employer sponsored health insurance premiums were rising 

about 3 percent. I would like to enter this report from the Kaiser 

Family Foundation on employer health benefits since that seems to 

be of interest to my friends on the other side. Thank you, Mr. 

Chairman. 

Chairman BRADY. Without objection. 

[The information follows: The Honorable Bill Pascrell] 


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Chairman BRADY. Mr. Buchanan, you are recognized. 

Mr. BUCHANAN. Thank you, Mr. Chairman. I also want to 

thank our witnesses for taking their time to be here today. 

Mr. Commissioner, let me just ask about subsidies people have 

brought up. One of my colleagues mentioned about getting a $5,000 

increase, but what happens—at least in Florida, I see a lot where 

you have realtors that are independent contractors, you have a lot 

of people that have a minimal salary but they are on commission, 

or you have minimal salary where they get subsidies, but they 


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might get a year-end bonus. How do you address that? Or somebody, for example, that one year as a realtor where real estate 

hasn’t been great for a period of time, but Florida is back now, was 

making $30,000 a year, now he might make $100,000 this year, the 

next year make $30,000. How do you deal with—you know, I would 

say that is a large percentage of people that are employed in America are in those circumstances where they don’t have a fixed salary 

at $60,000 a year. They might earn $70,000, but it is based on how 

they do over the year—— 

Mr. KOSKINEN. Right. 

Mr. BUCHANAN [continuing]. In terms of bonus, commissions or 

other things. How do you address that in terms of subsidies one 

year making $30,000 and the next year making $150,000 the following year making $30,000? 

Mr. KOSKINEN. Those—it is a situation many people face. They 

face the same issue when they file their estimated taxes or make 

W–2 determinations. They make an estimate, their best judgment 

as to what they are going to owe in taxes. Everybody tries not to 

owe taxes at the end of the year, so over 80 percent of the people 

who file actually get refunds every year. And so they are going to 

make the same kind of judgment here. They have to make an estimate when they file for withholding or when they file estimated 

taxes, they have to make an estimate here if they are going to 

apply for the premium tax credit. At the end of the year when they 

file their tax return, much as when they reconcile their income generally on their overall taxes, they will make a reconciliation as to 

whether they got too much or too little on their premium tax credit 

in the advanced payment. 

Our expectation is, just as people adjust their estimates for withholding, and they usually over withhold to make sure they take 

into that account, that we expect that a lot of people when they 

make their estimates, if they are fluctuating like that, will estimate 

on the low side, will have a lower—— 

Mr. BUCHANAN. Well, it sounds like you have got a pretty good 

handle on, you know, all these variations of possibilities. 

Mr. KOSKINEN. Well, we expect them to kind of mirror the normal variations people make when they have to estimate how much 

to pay in estimated—— 

Mr. BUCHANAN. Thank you. I want to kind of move over to Mr. 

Slavitt real quick. 

You have been in the healthcare-related industry for how many 

years? 

Mr. SLAVITT. 20 years. 

Mr. BUCHANAN. Yeah. Let me just tell you, as someone that 

has been in business before I got here 30 years and bought a lot 

of health care for a lot of employees, I think we have got quality 

health care, but it is—my biggest concern is cost. I think it is—everybody likes to talk about the middle class, I grew up in the middle class, but it is bankrupting the middle class, cost. It is not unusual in my area, I represent a part of Florida, but I am the only 

member in Florida, where you have someone between 50 and 65 

years old, I do a lot of town halls, that are talking their costs for 

them or maybe their employees, but ideally for them and their family of four could be as high as $2,000 a month. That is not unusual, 


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$1,500 to $2,000. So I am very concerned about health care in general, and I see the costs continuing to go up. As someone that has 

employed a lot of people or I talk to a lot of people back in the district, they get a bill every year, even since the ACA, going up 10 

to 20 percent a year, cost of living is 2 to 3 percent, and this has 

been going on for, it seems like, 10 or 15 years. It is one of the biggest concerns we have got, is health care. It is not that we don’t 

have good providers, but the cost is bankrupting, in my opinion, 

the middle class. What do you say to that? Do you think—do you 

share that concern. 

Mr. SLAVITT. Yes. Congressman, you are—you are exactly right. 

You know, affordability—— 

Mr. BUCHANAN. I don’t use the term ‘‘bankruptcy’’—— 

Mr. SLAVITT. Right. 

Mr. BUCHANAN [continuing]. Lightly, I am an optimist, but it does concern me when people are paying $1,000 to $2,000 a month 

for health care along with all their other costs, and I don’t see that 

changing. 

Mr. SLAVITT. Yes. 

Mr. BUCHANAN. Go ahead. 

Mr. SLAVITT. Yes. Congressman, affordability is one of the three 

critical pillars of our implementation, along with quality and access. And I think there are a couple things that are, I think, highly 

encouraging, although early still: one is that the premium levels 

that people are paying are at much more affordable levels; second 

is I think those in business and those who are individual health 

plan members for some time are used to things like double digit 

rate increases. And I think, you know, the five or six States that 

have publicly put forward the rates that they are going to have for 

2015 are all in the range of single digits. I think Arkansas was a 

couple percent, I think Delaware was a couple percent, I think 

California was 4 percent. So these are relatively—— 

Mr. BUCHANAN. I would take—just do me a favor and take a 

look at Florida. I have met with one of the largest providers in the 

State and did a lot of our stuff, one of the largest, met with the 

CEO for the State. 

Mr. SLAVITT. Yep. 

Mr. BUCHANAN. And, you know, they are talking—I don’t know 

what they are going to be. It is going to 20, 40 percent. They are 

losing a lot of money, because they have got the sickest in Florida, 

a lot of them that are joining up and they are very concerned. They 

used to make tens of millions, now they are making zero. So I can 

see what is going to happen to—you know, from that standpoint, 

so I am very concerned about that. 

Let me mention one other thing I wanted to bring up. The insurance companies in our State have been in to see me that they are 

looking to the Federal Government, because they were promised or 

felt they were promised that they would make a certain return or 

somehow the government would underwrite their losses. What is 

your sense of that? Is there any—are insurance companies going to 

have the opportunity to come back to the Federal Government and 

get subsidized somehow? 

Mr. SLAVITT. So let me follow up in writing, given that I am 

out of time, but, no, that is—that is not going to be the case. 


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Mr. BUCHANAN. That is what they are looking for. 

Chairman BRADY. Thank you. Time has expired. 

Mr. Blumenauer is recognized. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. 

Commissioner, I appreciate your coming back for another round. 

Mr. MCDERMOTT. You might push your mike. 

Mr. BLUMENAUER. My mike was on. It is not—— 

I will try Mr. Pascrell’s, not that he needs a mike. 

Chairman BRADY. It always seems to work. 

Mr. BLUMENAUER. That is right. 

Mr. MCDERMOTT. He turned that off. 

Mr. BLUMENAUER. Mr. Commissioner, I appreciate your joining us for another round. I particularly appreciate the end of your 

testimony where you were talking about needing the resources to 

be able to meet the needs of people, not just with the Affordable 

Care Act provisions, but just the ongoing challenges of trying to administer an IRS Code that Congress repeatedly makes more complex. No IRS employees are complicating the Code. That is our job. 

I had the occasion last month to just sit down in a large sort of 

brown bag discussion with your employees in Portland, and I was— 

I was struck by how frustrated they are. They don’t want people 

on hold for 45 minutes. They want to be able to meet their needs. 

And I would just urge you to be relentless in driving this point 

home that we can’t continue to cut the IRS budget, reduce staffing, 

make the Code more complex, and then beat up on the IRS and 

still expect that we are going to keep the highest compliance rate 

in the world for over 150 million taxpayers. I appreciate your forthrightness, and I would just encourage it. 

And I would hope that individual members of this committee in 

particular could sit down in a shirtsleeve session off the record, no 

cameras, and just meet with the men and women who are trying 

to meet the needs of our constituents. I have found it instructive 

every time I do it, and I think maybe if more of our members did 

that, we might look at the budgeting a little different. 

But I would just say, Mr. Chairman, I appreciate your ongoing 

efforts and your evenhandedness, even allowing us to slide over for 

a second or two, and your good humor. I also appreciate that you 

have been looking at a draft kind of tying together some elements 

that a number of us have co-sponsored on the committee, good 

work from Mr. Roskam, Mr. Gerlach. 

I have indicated in the past that I hope we can shift gears and 

get to the point where we can actually have hearings on things 

that can pass and don’t have anything to do with the Affordable 

Care Act. I would note the legislation I have with my good friend 

Dr. Roe helping make sure that end of life care has a value. And 

we put it in the Affordable Care Act. It somehow wasn’t included 

in terms of reconciliation. But in terms of what we do with Medicare, card identification, the secure card, the Prime Act, Congresswoman Black and I have some legislation dealing with value-based 

insurance. There is a whole host of things that we could be making 

progress on. Put them on the floor. They will pass. They will make 

the system better. They are not going to make the nightly news, 

but collectively we will be doing our job. And I hope we can minimize hearings that are just beating up on people for things beyond 


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their control, that actually we kind of make their job harder, and 

that we get down to cases. 

I appreciate the draft that you are circulating. I look forward to 

supporting it. And the other references that I have made of bipartisan legislation that will make a difference, that can be approved, 

they could—some of these could roll out before we adjourn for October, and certainly in the lame duck when we will be standing 

around trying to figure out what to do, waiting for the powers that 

be on the big stuff, we could get some good things going and give 

Congressman Gerlach a going-away present with important legislation that will make a difference. 

Thank you, Mr. Chairman. Again, I appreciate your good humor 

and your evenhandedness, and I would respectfully request that 

maybe we could put that to work on some legislation that will pass 

before we adjourn for the year. 

Chairman BRADY. Thank, Mr. Blumenauer. I want to—I share 

your belief that while we have very strong differences on the Affordable Care Act, and a hearing like today is really about finding 

out what our families and patients and taxpayers have to face in 

the second year, there are legitimate questions that need to be 

asked. But we are also trying to create a climate where we can 

take the good work that is being done by these committee members 

on all those areas that you have an interest in, I think we have 

a bipartisan interest in, in legislation and move that forward. So 

we have got some work to do in each of those areas. We are trying 

to work through these final points, for example, on the—our fraud, 

bipartisan fraud bill and some other issues as well. So look forward 

to working with you. Thank you. 

Now, Mr. Smith, you are recognized. 

Mr. SMITH. Thank you to our witnesses today for your time here 

and sharing your insight and expertise. I think between the two of 

you, you do have vast insight, perhaps Mr. Slavitt, you bring some 

objectivity as a relatively new employee over at CMS. 

Let me start. Commissioner Koskinen, the waivers that are offered by HHS or CMS, does IRS keep track of those waivers? 

Mr. KOSKINEN. Yes. We have got a very, I think, positive working relationship with HHS and CMS. And to the extent that exemptions or waivers are created, they get built into our system as 

well, and so we are—we need to be aware of those, because obviously when people file their taxes, that we have a form that allows 

them to identify the exemption that applies to them. 

Mr. SMITH. What percentage of the American population files a 

Federal tax return? 

Mr. KOSKINEN. Well, that is a very good—a good question, because if you are below a certain income level, you are not required 

to. We have 150 million returns that are filed every year, and it 

is obviously the vast majority. I would be happy to get back to you, 

because I have never actually asked that question as to how many 

people do not have to file a return. 

Mr. SMITH. I mean, because we have heard earlier that, you 

know, there are so many great and wonderful things that have 

come about, and yet we know that the enforcement of and the benefits perhaps to some, benefits of the healthcare situation here are 

offered through the Tax Code. So are there concerns that perhaps 


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there might be some beneficiaries out there who would not see the 

benefits or the complications associated along the way? 

Mr. KOSKINEN. Thus far, our experience has been, as a general 

matter, and there are a number of tax credits that have been written into the Tax Code that we administer, the vast majority of people take advantage of those credits. We do run the earned income 

tax credit program, and part of our goal there is to make sure everybody who is eligible for the credit knows about it and uses it. 

In that case, about 80 percent of the eligible people for the earned 

income tax credit actually take advantage of it. So I am sure if everything continues to go as it usually does, there will be some people who are eligible for the premium tax credit and support for 

health care who may not take advantage of it. 

Mr. SMITH. Okay. Thank you. 

Mr. Slavitt, let’s talk about the individual mandate briefly. Can 

you give us an update on the individual mandate? Obviously the 

administration is choosing to stick with the individual mandate in 

contrast to delaying the employer mandate. Is that accurate? 

Mr. SLAVITT. The individual mandate, yes, is law and we are— 

we are administering and implementing the law that way, yes. 

Mr. SMITH. And what would you say is a rough, I am not expecting exact, but a rough compliance rate with the individual 

mandate? 

Mr. SLAVITT. I don’t think that will be known until after we get 

through the year and through tax season, but in any event, I don’t 

have an estimation, and I would be happy to try to get one to you, 

if it is possible. 

Mr. SMITH. So penalties being levied would take place when? 

Mr. SLAVITT. I think through the Tax Code, is my understanding. 

Mr. KOSKINEN. It would be—it would be this year. There is 

no—— 

Mr. SMITH. No. I know. That—that is the how; but the when. 

Mr. SLAVITT. During the tax filing season. 

Mr. KOSKINEN. It will be when you file your return, on the 

1040–A, you will check either I have got coverage or I have a premium tax credit. 

Mr. SMITH. Wait. We are through one tax-filing season where 

that question has been asked, correct? 

Mr. KOSKINEN. No. It did not apply last year. So the 2014 filing season for tax year 2013 did not have any requirement for individual shared responsibility payment. The first time it will take effect—— 

Mr. SMITH. But the question was asked about health care, was 

it not? 

Mr. KOSKINEN. No. In other words, the tax returns last year 

did not have Affordable Care information in them. 

Mr. SMITH. Okay. So—but then in this next tax-filing season, it 

will. 

Mr. KOSKINEN. This coming spring for the 2014 tax year, we 

call it filing season 2015, because—— 

Mr. SMITH. Okay. If someone marks ‘‘no,’’ can you share what 

happens from that point forward? 


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Mr. KOSKINEN. Yes. If you mark on your return that—‘‘no,’’ 

and you don’t—aren’t eligible for an exemption or a waiver, and 

there is a form you can fill out, then what happens is you will do 

a calculation and you will have the responsibility, the additional 

tax for this year is the $95 per individual capped at $250, give or 

take a little, for a family. 

Mr. SMITH. Would that be considered a penalty? 

Mr. KOSKINEN. Well, it is an additional tax. You can call it, 

you know—you can call it a penalty. Whatever it is, you will owe 

that amount of money. 

Mr. SMITH. It is avoidable, you are saying? 

Mr. KOSKINEN. Pardon? 

Mr. SMITH. It is avoidable? 

Mr. KOSKINEN. It is not avoid—it is avoidable if you are eligible for an exemption, and there are a significant number of exemptions available for people who don’t—who had short—lack of coverage for less than 3 months, people who have particular hardships 

can provide that information, some religious affiliations will be able 

to provide that information. There are a series of exemptions. So 

it is avoidable to that extent, but if you don’t qualify for an exemption, then you will owe the additional tax. 

Mr. SMITH. Thank you. I yield back. 

Chairman BRADY. Thank you. 

Ms. Black is recognized. 

Ms. BLACK. Thank you, Mr. Chairman. Thank you for holding 

this very important hearing. I appreciate being a non-member of 

this committee and having an opportunity to be able to ask the witnesses questions. And thank you, by the way, for being here. 

Commissioner, I want to go back to a line of questioning that my 

colleague from Florida was talking about in relation to income accuracy in the filing process. And I think that I have probably—I 

think I remember bringing this up the last time we had a hearing 

on the oversight, and that was the idea of the E–FLEX Coalition. 

Mr. KOSKINEN. I am sorry. E–FLEX—— 

Ms. BLACK. The E–FLEX Coalition made a specific recommendation to make the administration of the tax credits more 

accurate. They suggested, and I quote, their suggestion is, ‘‘giving 

employers the option to prospectively file information with the IRS 

about the coverage available to employees through an annual certification process.’’ 

Their letter went on to say, we believe that it is in the collective 

best interests of individual Americans, the employers and the administration to ensure accuracy—which is what my colleague was 

talking about—on such upfront determinations to avoid the subjecting of individuals to unexpected payments of any credits for 

which the exchanges incorrectly deemed them to be eligible. 

Now, the Treasury during the rule writing process rejected that 

recommendation. Do you believe, given what we are going to be 

seeing, as my colleague referenced, that sometimes the—especially 

for those that are in sales where their income may be here and the 

next year it might be down here, that it would be helpful to have 

that information prospectively? 


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Mr. KOSKINEN. Well, tax policy matters are determined by the 

Treasury Department and the Congress. We are just the tax administrators, so we follow whatever the rules are. 

As I noted, every taxpayer makes an estimate in advance as to 

what their income is going to be in the following year and then 

they reconcile it when they file their tax return and they know exactly what they earned. Where taxpayers have variety and they 

have bonuses or they are on commissions, in the normal process of 

filing their taxes, they make estimates, and they generally make 

estimates trying to make sure that they don’t owe any more tax 

than usual, which means that is why most people get a refund. 

We expect that with regard to those who qualify for the premium 

tax credit and are applying for an advanced payment, they will adjust and make the same kinds of estimates that they make for 

their withholding purposes. 

Ms. BLACK. But the system is more complicated when you are 

having to go back and figure out, okay, do taxes. Now, let’s just say 

someone has earned more than what they anticipated. Will there 

be a call-back? 

Mr. KOSKINEN. Not a call-back. If you have earned more than 

you anticipate and you have been getting you advanced payment—— 

Ms. BLACK. Right. 

Mr. KOSKINEN [continuing]. Paid to your insurance company, 

the payment doesn’t come to you, at the end of the year, if you, in 

effect, have claimed more of a credit that has gone to your insurance company, you will either have a smaller refund or more tax 

owed, yes. 

Ms. BLACK. So it will just be withheld from them. That won’t 

be—let’s say that they don’t owe—or they are not due a return. 

And so what will happen then, because you can’t withhold something from someone who wasn’t due a return? How will you retrieve the money that has been paid out for an advanced tax credit? 

Mr. KOSKINEN. They would be treated the same way any tax 

collection process. We would match up, we would determine if there 

is an amount owed. The first thing we usually do is send people 

a letter saying we see a discrepancy in your return. Can you explain what the issue is. 

In fact, I would just make a plug here. We are trying to make 

people understand. We contact taxpayers by letter first. So if you 

are hearing from us by phone for the first time, the chances are 

pretty good you are not hearing from us. There is a significant 

amount of tax scamming going on that we are concerned about. 

But in any event, we would advise the taxpayer. And they would 

be treated the same way any taxpayer was who had an amount 

owing, or at least some apparent discrepancy in what they filed 

and what they owed. 

Ms. BLACK. It seems so complicated. It seems to me it would almost be better for us to say, what was your income this year, and 

then having the filing date maybe 2 months after they know what 

their income is at the end of the year. So moving the signup to 

maybe February so they know what their income was last year and 

you can go on that, but it seems like a very complicated system. 


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Let me go to Mr. Slavitt on an issue that you did actually mention, and that was the end-to-end testing. And we know that the 

end-to-end testing is a critical step in preparing for that successful 

2015 open enrollment. Last year the testing occurred far too late, 

and we know that there was not time to correct those problems. 

And so you did mention that there is a new functionality and you 

are going to be rolling that out over the summer. Does this include 

testing of the auto enrollment renewal transaction process as well? 

Mr. SLAVITT. Yes, Congresswoman, that will be tested. I believe 

it is slated in October. 

Ms. BLACK. Slated in October. 

Mr. SLAVITT. Yeah. 

Ms. BLACK. So that is—the—— 

Mr. SLAVITT. The auto—— 

Ms. BLACK [continuing]. Signups—okay. And the signups will 

begin when? 

Mr. SLAVITT. So recall that the auto enrollment functionality 

will occur in December—— 

Ms. BLACK. In December. Okay. 

Mr. SLAVITT [continuing]. Because that is when—— 

Ms. BLACK. You won’t test it until November? 

Mr. SLAVITT. We will be—so to give a quick overview of the 

process, and I know I am over time, people will have—the beginning of open enrollment is November 15th. People will have an opportunity to come back, shop, and select a plan. The functionality 

you are referring to is what do we do in the occasion when somebody is enrolled in a plan—— 

Ms. BLACK. Right. 

Mr. SLAVITT [continuing]. But doesn’t come back. 

Ms. BLACK. Right. 

Mr. SLAVITT. December 15th, we will automatically enroll them 

in their existing plan, presuming that that plan is still offered 

through the marketplace. 

Ms. BLACK. But you are doing some testing on that as well? 

Mr. SLAVITT. We will—we will test, we will test everything. 

Ms. BLACK. Okay. So have you worked with the insurers on this 

testing? 

Mr. SLAVITT. So our initial testing with insurers actually is beginning this week with a group of insurers we call alpha insurers, 

and then in early October, we will invite all the insurers to begin 

to do their testing, end-to-end testing with the goal to make sure 

that when someone comes through the process, at the end of it, 

they get an 834 and they can return one back to us. 

Ms. BLACK. Okay. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman BRADY. Thank you, Ms. Black. 

Commissioner Koskinen, I just want to follow—I am not sure we 

got a clear answer on one part of Representative Black’s questions. 

If your income changes or if some reason there is an overpayment 

of subsidies, there is a cap on your overpayment depending upon 

your income, but if you were given, for example, affordable—offered 

affordable insurance at work and you don’t take it, you are not eligible period. The law is very clear that all of that must be repaid. 


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Will you be following—following the law in the collection of that in 

that instance in the ineligible subsidy? 

Mr. KOSKINEN. Yes. If somebody is ineligible and has received 

a credit, they will be treated the way anybody else would be in our 

compliance process. 

Chairman BRADY. No, no, no. The question was, the law in that 

case, there is not a cap. All of the subsidy must be repaid. Will you 

be following the law in that recapture? 

Mr. KOSKINEN. Yes. Wherever we can, we follow the law. 

Chairman BRADY. Whenever we can. I encourage you to follow 

the law—— 

Mr. KOSKINEN. Right. 

Chairman BRADY [continuing]. In all instances. And I had so 

many things going through my mind at that point. Commissioner, 

thank you for being here. 

Mr. Slavitt, I know my office has reached out to you as well from 

a letter that Ms. Black, myself and others sent to Ms. Tavenner in 

August regarding the issue of the abortion surcharge, if you recall 

from the law that was a sensitive issue. The resolution was that 

consumers could know which plans provided those services, to 

choose one or the other, and if they did, there would be a separate 

charge to that. That was very clear. We sent a letter asking for a 

written response from the agency. I would encourage you to encourage the agency to respond as soon as possible. 

Mr. SLAVITT. Yes, chairman. We are—we have the letter. 

Chairman BRADY. Great. 

Mr. SLAVITT. We are working on it. 

Chairman BRADY. Great. Thank you very much. 

I want to thank the witnesses for being here today. There are 

still a lot of questions dealing with the law going forward, but we 

will work together on this. 

I do want to recognize Dr. McDermott for a special notice. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. Before we close 

the hearing, I would like to say a few words about a departing staff 

member, Askia Suruma is leaving the committee after 21 years in 

Congress—or working for Congress. He is the staff director of the 

Democrats on the committee and the staff director on the Oversight 

Committee. Prior to coming to this committee, he was a staff director—senior staff director for the Rules Committee and worked with 

Martin Frost from Texas. He is leaving to go to George Washington 

University, and we are grateful for his time here and wish him all 

the best, and please join me in thanking him. 

[Applause.] 

Chairman BRADY. Thank you for all your hard work. 

With that, the witnesses, members do have 14 days in which to 

submit questions. Encourage the witnesses to respond as quickly as 

possible. Again, thank you for being here today. Hearing is adjourned. 

[Whereupon, at 11:45 a.m., the subcommittee was adjourned.] 

Æ 


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