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70–946 PDF 2011

EXPANDING HEALTH CARE OPTIONS: ALLOWING 

AMERICANS TO PURCHASE AFFORDABLE COVERAGE ACROSS STATE LINES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MAY 25, 2011 

Serial No. 112–50 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

(II)

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

EDOLPHUS TOWNS, New York 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 4 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 6 

Prepared statement .......................................................................................... 7 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 8 

Hon. Leonard Lance, a Representative in Congress from the State of New 

Jersey, prepared statement ................................................................................. 94 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 94 

WITNESSES

Steve Larsen, Director, Center for Consumer Information and Insurance 

Oversight, Centers for Medicare and Medicaid Services, Department of 

Health and Human Services ............................................................................... 10 

Prepared statement .......................................................................................... 14 

Stephen Parente, Ph.D., Professor of Health Finance, University of Minnesota .................................................................................................................... 20 

Prepared statement .......................................................................................... 22 

Christie Herrera, Director, Health and Human Services Task Force, American 

Legislative Exchange Council ............................................................................. 27 

Prepared statement .......................................................................................... 29 

Stephen Finan, Senior Director of Policy, American Cancer Society, Cancer 

Action Network ..................................................................................................... 42 

Prepared statement .......................................................................................... 45 

Paul Howard, Ph.D., Senior Fellow, Manhattan Institute ................................... 59 

Prepared statement .......................................................................................... 61 

SUBMITTED MATERIAL

Letter of April 28, 2011, from Janice K. Brewer, Governor of Arizona, submitted by Mr. Pallone .......................................................................................... 96 

Article entitled, ‘‘Consumer Response to a National Marketplace for Individual Health Insurance,’’ The Journal of Risk and Insurance, 2010, submitted by Stephen Parente .................................................................................. 97 

(1) 

EXPANDING HEALTH CARE OPTIONS: ALLOWING AMERICANS TO PURCHASE AFFORDABLE COVERAGE ACROSS STATE LINES 

WEDNESDAY, MAY 25, 2011 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:05 a.m., in room 

2123, Rayburn House Office Building, Hon. Joseph R. Pitts, (chairman of the subcommittee) presiding. 

Present: Representatives Pitts, Whitfield, Shimkus, Myrick, Murphy, Blackburn, Gingrey, Latta, McMorris Rodgers, Cassidy, Guthrie, Barton, Upton (ex officio), Pallone, Dingell, Engel, Capps, 

Schakowsky, Gonzalez, Weiner, Waxman (ex officio), and Green. 

Staff Present: Clay Alspach, Counsel, Health; Andy Duberstein, 

Special Assistant to Chairman Upton; Debbee Keller, Press Secretary; Ryan Long, Chief Counsel, Health; Katie Novaria, Legislative Clerk; John O’Shea, Professional Staff Member, Health; Heidi 

Stirrup, Health Policy Coordinator; Phil Barnett, Minority Staff Director; Alli Corr, Minority Policy Analyst; Tim Gronniger, Minority 

Senior Professional Staff Member; Purvee Kempf, Minority Senior 

Counsel; Karen Lightfoot, Minority Communications Director and 

Senior Policy Advisor; Karen Nelson, Minority Deputy Committee 

Staff Director for Health; and Landsay Vidal, Minority Press Secretary. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. The subcommittee will come to order. The chair recognizes himself for 5 minutes for an opening statement. 

The topic of today’s hearing is the purchase of health insurance 

across state lines. Across state line purchasing of health insurance 

allows health plans to be portable, to move with an individual from 

job to job and state to state and gives Americans a wider range of 

plans from which to choose the one that suits them and their families best. Every state has health insurance mandates; from Idaho 

with the fewest, 13 mandates, to Rhode Island, topping the list 

with 69 separate mandates. My home State of Pennsylvania has 

57. 

Altogether, the Council for Affordable Health Insurance has identified a total of 2,156 mandates across the 50 states and the DisVerDate Nov 24 2008 10:38 Feb 06, 2012 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-50 052511\112-50 CHRIS
2 

trict of Columbia in 2010. These range from benefit mandates to 

provider mandates to groups of people who must recover. Each 

mandate makes the policies sold in that state more comprehensive. 

However, each mandate also increases the cost of those policies. 

Most mandates increase the cost of policies by less than 1 percent, 

which doesn’t sound like much, but when a state has 30, 40, or 50 

mandates, and some mandates can add 5 percent or even 10 percent more to a policy, you are quickly pricing many people out of 

the market completely. By some estimates, an average of 30 to 40 

mandates can increase a total cost of a policy between 20 and 45 

percent. 

States have begun to realize that, while well-intentioned, mandating important health benefits provider coverage for their citizens has backfired. At least 12 states now allow mandate-free or 

mandate-like policies so that people can buy a plan that is more 

suited to their needs with fewer costly mandates. 

Additionally, nearly 30 states now require a cost estimate of a 

potential mandate before it can be enacted. This should be about 

consumer choice, not a one-size-fits-all state mandate package that 

may or may not address a particular individual’s needs. 

This is about empowering people to make decisions for themselves, not assuming they need the government to protect them for 

themselves. 

If a Pennsylvania policy contained mandated benefits I determined that I did not need or want, why shouldn’t I be able to by 

a policy from New Jersey or New Mexico? Why shouldn’t I be able 

to shop among different states and buy the policy that is at the 

best price for me, and is the best tailored to my health needs and 

my situation. Furthermore, why shouldn’t I expect that when 

states and plans have to compete for my business and not take it 

for granted, that costs will go down and quality will go up. 

So with those introductory remarks, I want to thank our witnesses, and I would like to yield the remaining time to the 

gentlelady from Tennessee, Ms. Blackburn. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Subcommittee will come to order. 

The Chair will recognize himself for an opening statement. 

The topic of today’s hearing is the purchase of health insurance across state lines. 

Across state line purchasing of health insurance allows health plans to be portable—to move with an individual from job to job and state to state—and gives 

Americans a wider range of plans, from which to choose the one that suits them 

and their families best. 

Every state has health insurance mandates, from Idaho with the fewest—13 mandates—to Rhode Island, topping the list with 69 separate mandates. 

My home State of Pennsylvania has 57. 

Altogether, the Council for Affordable Health Insurance has identified a total of 

2,156 mandates across the 50 states and the District of Columbia in 2010. These 

range from benefit mandates, to provider mandates, to groups of people who must 

be covered. 

Each mandate makes the policies sold in that state more comprehensive; however, 

each mandate also increases the cost of those policies. 

Most mandates increase the cost of policies by less than 1%, which doesn’t sound 

like much. But, when a state has 30, 40, or 50 mandates—and some mandates can 

add 5% or even 10% more to a policy—you are quickly pricing many people out of 

the market completely. 

3 

By some estimates, an average of 30 to 40 mandates can increase the total cost 

of a policy between 20% and 45%. 

States have begun to realize that, while well-intentioned, mandating important 

health benefits and provider coverage for their citizens has backfired. 

At least 12 states now allow ‘‘mandate-free’’ or ‘‘mandate-lite’’ policies, so that people can buy a plan that is more suited to their needs, with fewer costly mandates. 

Additionally, nearly 30 states now require a cost estimate of a potential mandate 

before it can be enacted. 

This should be about consumer choice, not a one-size-fits-all state mandate package that may or may not address a particular individual’s needs. This is about empowering people to make decisions for themselves, not assuming they need the government to protect them for themselves. 

If a Pennsylvania policy contained mandated benefits that I determined I did not 

need or want, why shouldn’t I be able to buy a policy from New Jersey or New Mexico? Why shouldn’t I be able to shop among different states and buy the policy that 

is at the best price for me and is the best tailored to my health needs and my situation? Furthermore, why shouldn’t I expect that when states and plans have to compete for my business—and not take it for granted—that costs will go down and quality will go up? 

Thank you to our witnesses, and I yield the remaining time to Representative 

Blackburn. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. And I thank you 

and Chairman Upton for holding the hearing today to discuss what 

I think is an innovative approach, and of course I believe this is 

important legislation for us to take up. Thank you to our witnesses 

for your preparation and your presence here today. 

You know, nearly 51 million Americans are lacking health insurance. Eighty-five percent of the uninsured workers cite 

unaffordability as the top reason for why they are uninsured. There 

is something we can do about this. The Health Care Choice Act, 

which is only 31 pages long, will harness market forces to lower the 

cost of health insurance and reduce the number of uninsured 

Americans by 12 million without any cost at all to the Federal Government. It is the right-type step. 

In 1965 there were only seven state benefit mandates. Today 

there are over 2,100 mandates on health insurance coverage. These 

mandates have increased health insurance premiums between 10 

and 50 percent for American families. For example, in a high mandate state like New York and Massachusetts, the average family 

premium is just over $13,000. Right across the river in a lower 

mandate state like Pennsylvania, the average is just about $6,000, 

which is about the same price as in my home State of Tennessee. 

This bill would give consumers the option of buying health insurance that meets their needs and is right for them and their family, 

even if that means buying a policy that is qualified in another 

state. And while I may prefer a plan that includes a chiropractor, 

that choice isn’t going to be right for everyone. So let’s give consumers the choice. As Speaker Hastert used to say, We shouldn’t 

be forcing people to buy a Cadillac when all they need is a Chevy. 

This bill will lower health insurance costs across the country by 

cutting red tape. Insurance plans won’t have to go through 50 different state certification process. The result will be significant savings, significant savings in the cost. 

And it is important to note that this bill will not decrease consumer protection or act as a race to the bottom. As I told President 

Obama when we did the health care forum at the Blair House, this 

4 

bill will let the people out of their states and allow them to choose 

a product that is good for them. 

Thank you, Mr. Chairman, and I yield back the balance of my 

time. 

Mr. PITTS. The Chair thanks the gentlelady. 

And I now recognize the ranking member of the subcommittee, 

Mr. Pallone, for 5 minutes for an opening statement. 

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

Mr. PALLONE. Thank you, Mr. Chairman. 

Allowing Americans to purchase insurance coverage across state 

lines is not a new idea. In fact, it is an idea that has been promoted by Republicans for many years and one that was extensively 

debated by this committee in 2005. And I think many who sit here 

today remember those proceedings, so you all know very well that 

I am strongly opposed to such proposals. But what I am even more 

opposed to is the way Republicans purport this idea as a proposal 

that would give consumers choices and access to more affordable 

health insurance, because the truth is, it does nothing of the sort. 

The only choices offered by this proposal are for insurance companies. They are the only ones who gain. It gives the insurance industry the choice to do business in the states that have the most 

favorable business climate and weakest consumer protections. The 

result is a complete circumvention and it would end state legislation as we know it. 

Now, state regulation and patient protections are vital to protect 

those who reside in that state from unscrupulous actors. Regulation is needed to protect those who would otherwise have no protection. If H.R. 371, a bill introduced by Representative Blackburn, 

entitled the ‘‘Health Care Choice Act’’ or any other bill that attempts to allow an insurance company to license their product in 

one state and sell insurance in another state, if any of those bills 

were to become law, it would quickly result in a race to the bottom 

among health insurance plans, a race that would drag down patients in its wake. 

H.R. 371 allows insurance companies to choose to operate under 

laws of states with weaker consumer protection and risk pooling 

standards. By doing so, plans will be allowed to cherry-pick the 

best risk, leaving older, sicker individuals isolated in pools without 

healthier individuals to offset their medical costs. And the result 

would be insurance markets in disarray, without any real pooling 

of risk. 

Furthermore, state regulators would be unable to provide assistance to individuals in their own states who opt to purchase coverage from a carrier selling under a second state’s law. In my home 

State of New Jersey, we have enacted extensive reforms that go beyond what many other states offer. And thanks to these consumer 

protections, New Jersey is able to ensure that its residents have access to quality individual insurance products. But in order for New 

Jersey to guarantee access to this kind of insurance, it must be 

able to spread risk throughout the market and that means pooling 

low and high risk together. 

5 

If H.R. 371 were enacted, it would completely dismantle New 

Jersey’s existing risk pool. Younger and healthier consumers would 

flee New Jersey’s market in order to obtain cheaper policies that 

provide less coverage, leaving only high-risk consumers in the market. 

Now I don’t think we can move back to a system with zero patient protections, putting insurance companies back in charge. This 

is the very thing that Democrats were trying to reverse when we 

passed the Affordable Care Act. We don’t want to empower insurance companies. So I can’t conclude without pointing out that H.R. 

371 also reveals the very popular and critical patient bill of rights 

provisions of the Affordable Care Act. That is no surprise. The insurance companies didn’t like those things either because they 

want to discriminate. 

So the protections that would be repealed include, among others, 

prohibiting gender rating, prohibiting the denial of people and children with preexisting conditions insurance, outlawing rescissions 

and prohibiting annual and lifetime limits on insurance. These are 

the antidiscriminatory practices that are already in effect under 

the health care reform and which my constituents say they very 

much like. These are all gone, all for the purpose of helping out the 

insurance companies because the Republicans simply want to be 

with the big insurance company. 

The Affordable Care Act also created state-based health insurance exchanges which would allow other insurance carriers to come 

into states, thereby increasing competition and lowering premiums. 

But the stark difference, of course, from the Republicans is that the 

insurance companies would have to comply with Federal and State 

mandates for coverage under the Affordable Care Act. 

I will also point out that the Affordable Care Act includes a provision known as health care choice compacts that allows insurers 

to sell insurance across state lines and only be subject to laws in 

the issuing state, but it includes protections for states and consumers. And, again, the difference: The Affordable Care Act put a 

decision to allow the insurer to sell across the line in the hands of 

the state where their product will be sold, not in the hands of insurance companies. 

My whole point here is, look, I understand you are talking about 

selling insurance across state lines; that can be done, but it can’t 

be done in a way that simply gets rid of the state protections, 

eliminates the risk pools and puts all the choices in the hands of 

the insurance companies. 

That is what you are doing with Ms. Blackburn’s bill and others 

that might be like it. And that is exactly what we don’t need. It 

is not a problem to be able to sell across state lines, it is the patient protections that need to be in place. 

Again, I guess this is one case, Mr. Chairman, where the Republicans actually do have a replace plan, but I think that this replace 

plan is not one that is good for American consumers, and I think 

it puts the country’s health system in a lot of trouble. So thank you 

for giving me a replace plan, but it is not one that I think we 

should enact into law. 

I yield back. 

6 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the full committee chairman, Mr. Upton, for 5 minutes. 

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

Mr. UPTON. Thank you, Chairman Pitts, for holding this hearing. 

Two weeks ago the committee reported out legislation that will 

help lower health care costs by enacting real medical liability reform. Today we will continue to examine ways that we can replace 

last year’s health care law with commonsense solutions that actually do lower costs. 

You heard our side talk about repeal and replace, and I do believe that this is one of those replacement planks and commend my 

colleague, Mrs. Blackburn, for leading the charge on this issue. 

Allowing Americans to purchase coverage across state lines is an 

idea that has been gaining momentum for good reason. Individuals 

do use and shop for products every day that are made in other 

states. Yet, in health care individuals are prohibited from purchasing coverage across state lines. 

This policy has major implications for families across the country 

looking for affordable health care plans. states have imposed over 

2,100 benefit mandates on health coverage. Estimates show that 

these requirements increase premiums anywhere from 10 to 50 

percent. Consumers are forced to buy a Cadillac health care plan. 

They are not even given the option of something that might better 

fit their needs. As a result, many individuals choose to go without 

any health care coverage because of the costly mandates. states are 

realizing benefit mandates are a problem that have to be dealt 

with. Fifteen states are now considering legislation to allow individuals to purchase coverage across state lines. 

Two states with very different political backgrounds, Georgia and 

Maine, have already recently enacted laws to promote interstate 

purchase. Even our Democratic colleagues demonstrated that they 

understood the problem at some level. 

Section 1311(d)(3) of PPACA requires states to assume the cost 

of mandates to make payments to individuals or health care plans 

to defray the costs of added premiums. I may disagree that this is 

the best solution, but at least they admitted that we have a problem. 

This hearing is about promoting flexibility and reducing cost. It 

is a stark contrast with PPACA which doubles down on Washington control of health care. 

HHS will design the health plan that every American must buy 

under the threat of a fine from the IRS. Empowering consumers is 

the key to controlling costs. American families know the value of 

their dollar. If given the chance, they will demand health plans 

that provide better quality, lower cost, something the Federal Government has consistently failed to do. The question is: Will Congress and the President give the people the freedom? 

I look forward to hearing testimony from today’s witnesses and 

would yield to my friend the chairman emeritus of the full committee, Mr. Barton. 

[The prepared statement of Mr. Upton follows:] 

7 

PREPARED STATEMENT OF HON. FRED UPTON

Chairman Pitts, thank you for holding this hearing. Two weeks ago, the committee reported out legislation that will help lower health care costs by enacting 

real medical liability reform. Today, we will continue to examine ways we can replace last year’s health care law with common-sense solutions that actually lower 

costs. Allowing Americans to purchase coverage across state lines is an idea that 

has been gaining momentum for good reason. Individuals use and shop for products 

every day that are made in other states. 

Yet in health care, individuals are prohibited from purchasing coverage across 

state lines. This policy has major implications for families across the country looking 

for affordable health plans. states have imposed over 2,100 benefit mandates on 

health coverage. Estimates show that these requirements increase premiums anywhere from 10 to 50 percent. 

Consumers are forced to buy a Cadillac health plan; they aren’t even given the 

option of something that better fits their needs. As a result, many individuals 

choose to go without any health coverage because of these costly mandates. 

States are realizing benefit mandates are a problem that must be dealt with. Fifteen states are now considering legislation to allow individuals to purchase coverage 

across state lines. Two states with very different political backgrounds, Georgia and 

Maine, have recently enacted laws to promote interstate purchase. 

Even my Democrat colleagues demonstrated they understood this problem at 

some level. Section 1311(d)(3) of PPACA requires states to assume the cost of mandates and make payments to individuals or health plans to defray the cost of added 

premiums. I may disagree that this is the best solution, but at least they admitted 

we have a problem. 

This hearing is about promoting flexibility and reducing costs. It is a stark contrast with PPACA, which doubles down on Washington control of health care. HHS 

will design the health plan that every American must buy under the threat of a fine 

from the IRS. 

Empowering consumers is the key to controlling costs. American families know 

the value of their dollar. If given the chance, they will demand health plans that 

provide better quality at lower costs—something the federal government has consistently failed to do. The question is, will Congress and the President give the people 

that freedom? I look forward to hearing testimony from today’s witnesses. 

Mr. BARTON. Thank you, Chairman Upton. 

In a prior Congress we passed a bill very similar to this bill out 

of committee. It was a priority of then-Speaker Denny Hastert and 

our former member John Shadegg. There are over 2,000 state mandates in the various states, and the premiums vary from about 

5,000 to about 13,000. So it is obvious if you allow plans that are 

covered in one state, that are approved in one state, to be offered 

across the state line, it is going to promote competition and should 

lower costs. 

So I am very happy that Chairman Upton and subcommittee 

Chairman Pitts are holding this hearing, and I would yield the balance of Chairman Upton’s time to Mr. Shimkus. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

I would just want to add that insurance products aren’t bad. In 

the era of multiple natural disasters, we will see that many people 

get recovery because of insurance product. They will get recovery 

for their automobile, they will get recovery of their home. And this 

attack on a sector that really helps people recover from disasters 

is always a little frustrating. 

All we are trying to say in this debate is those types of policies 

can be used in the health care industry; it is just some state mandates get in the way of really having a competitive product. I will 

give you one example. state Senator in my State of Illinois said 

that the largest increase in a health insurance policy was when the 

state mandated contraceptive coverage. 

8 

Now, should you be forced to buy an individual package that has 

contraceptive coverage and raise your rate? Many of us would 

argue, no, you should not. Should there be minimum coverage for 

things that an insurance commissioner would want to get involved 

and engaged in and help resolve disputes? Yes. 

So I think there is a middle ground here that we could reach, 

and I will end on saying I do think this is one of many steps that 

we will have to address the replace aspects of ObamaCare as we 

move forward. 

I yield back the balance of my time. 

Mr. PITTS. The chair thanks the gentleman and recognizes the 

ranking member of the full committee, Mr. Waxman, for 5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Mr. Chairman, up until today this committee only 

acted to repeal provisions of the Affordable Care Act. Today for the 

first time we see what the replacement is. However, this replacement clearly fails to keep the promises made in the Republican resolution to replace the Affordable Care Act, and it would be a step 

backward for the American people. 

The Republicans promised to increase the number of insured 

Americans and to lower health care premiums. For people who are 

sick, where insurance is a lifeline, this proposal of allowing insurance companies to sell their product across state lines does just the 

opposite. 

The Congressional Budget Office analyzed the legislation introduced by Representative Blackburn in 2005 when it was supported 

by Mr. Shadegg. In its letter, CBO said there would be very little 

effect on the rate of uninsurance; that this proposal would cause 

families to lose employer-sponsored insurance; and those needing 

health care, to lose insurance in the individual market. That is a 

far cry from the Republican claims that this bill will cover millions 

of the uninsured. CBO also noted that the bill would increase the 

price of coverage for those expected to have relatively high health 

care costs. 

How is increasing premiums for the sick, who already spent dollars on health care at the expense of rent and food, a step forward 

in providing quality health care? This bill basically asked someone 

with diabetes or breast cancer to pay more or go without health insurance so that someone else can pay less. In other words, they are 

supposed to buy a lower-priced car. Well, I don’t think they are 

going to be able to buy anything, because they still can be excluded 

for preexisting conditions. 

The goal of the Affordable Care Act is to make affordable coverage available to everyone, sick and healthy alike, not to help one 

group of people at the expense of another. Let’s be clear: states 

have long had the ability to allow sales of insurance across state 

lines, but they could control how it happens and when it happens, 

and the Affordable Care Act affirmed that policy. 

Today Maine, Georgia, and Wyoming have passed laws to allow 

purchasing across state lines. Maine and Wyoming decided to allow 

this with a limited number of states, but the Federal preemption 

9 

of their laws by the Blackburn bill would require they open their 

borders up to every state in the country. 

Numerous other states are debating pending bills and any legislation is merely preempting the states’ prerogative to do it their 

way. That is an amazing thing for the Republicans, who say that 

states ought to be able to act on their own. All wisdom is not here 

in Washington. Instead, here in Washington we would tell the 

states you can’t do it your way, you have got to do it our way. 

Well, Governor Jan Brewer of Arizona last month vetoed a bill 

that allowed selling insurance across state lines, saying that this, 

‘‘provision would change Arizona’s benefit requirements based on 

legislative decisions in other states.’’ She also said she is concerned 

about other risks to our citizens who may be subject to other states’ 

regulatory procedures that can leave them with little recourse in 

the event of mistreatment. 

The proposal before us today would not allow states to permit the 

selling of insurance across state lines; it would require it to be done 

the way the Federal Government insists. 

This bill is unlike the Affordable Care Act, which regulates insurance to set a Federal minimum standard but permits states to 

go further to protect their state’s residents. 

Republicans claim to support the authority of states to govern 

themselves as they see fit, but this is not what they stand for when 

it comes to legislation. The people with breast cancer, diabetes, and 

newborns, have been guaranteed coverage for their services by 

most but not all states. So when the Federal Government comes in 

and preempts those state laws, patients with breast cancer and diabetes may not be able to find insurance that covers their treatments and testing. If it is covered in another state doesn’t mean 

the insurance company is offering a bare-bones package and is 

going to offer it in every state. We don’t mandate the insurance 

companies to do anything. We only mandate that states allow those 

insurance companies who think they can make a buck come in and 

sell it if they are allowed to sell it anywhere else. 

Critics claim the state benefit requirement adds as much as 50 

percent to health insurance premiums, according—if I might, Mr. 

Chairman, according to a more impartial source, the National Association of Insurance Commissioners, it was less than 5 percent. 

This proposal was a bad idea on its own terms as a replacement 

for the Affordable Care Act. It is disastrous. 

Thank you Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. 

I would like again to thank the witnesses for agreeing to appear 

before the committee this morning. Your willingness to take time 

out of your busy schedules underscores just how important this 

issue is to all of you, as it is to all of us. 

Our first witness, Mr. Steve Larsen, is the director of the Center 

for Consumer Information and Insurance Oversight at the Centers 

for Medicare and Medicaid Services. 

Our next witness is Dr. Stephen Parente who is the Minnesota 

insurance industry professor of health finance and insurance in the 

Department of Finance in the Carlson School of Management at 

the University of Minnesota. 

10 

Christie Herrera is the director of the American Legislative Exchange Council’s Health and Human Services Task Force. 

Stephen Finan is the senior director of policy for the American 

Cancer Society’s Cancer Action Network. 

And lastly, Dr. Paul Howard is a senior fellow at the Manhattan 

Institute. 

Your written testimony will be entered into the record. We ask 

you to summarize in 5 minutes, each of you. 

STATEMENTS OF STEVE LARSEN, DIRECTOR, CENTER FOR 

CONSUMER INFORMATION AND INSURANCE OVERSIGHT, 

CENTERS FOR MEDICARE AND MEDICAID SERVICES; STEPHEN PARENTE, PH.D., PROFESSOR OF HEALTH FINANCE, 

UNIVERSITY OF MINNESOTA; CHRISTIE HERRERA, DIRECTOR, HEALTH AND HUMAN SERVICES TASK FORCE, AMERICAN LEGISLATIVE EXCHANGE COUNCIL; STEPHEN FINAN, 

SENIOR DIRECTOR OF POLICY, AMERICAN CANCER SOCIETY, CANCER ACTION NETWORK; AND PAUL HOWARD, PH.D., 

SENIOR FELLOW, MANHATTAN INSTITUTE 

Mr. PITTS. Mr. Larsen, you may begin your statement. 

STATEMENT OF STEVE LARSEN 

Mr. LARSEN. Good morning, Chairman Pitts, Ranking Member 

Pallone, members of the subcommittee. 

Mr. PITTS. Is the mic on? 

Mr. LARSEN. Can you hear? OK. 

Thanks for the opportunity to appear here today. I have submitted my full testimony for the record. I am pleased to be here 

and have the opportunity to comment on the issues related to the 

sale of insurance across state lines. 

I know we all share the same goal, of assuring affordable and 

comprehensive insurance options for individuals and families. And 

I believe we also agree that healthy competition among private insurers can help drive costs down and provide more consumer 

choice. But in our view, the Affordable Care Act accomplishes these 

goals in the best possible way. 

First, in 2014, state exchanges will foster competition among insurers by having insurers compete on the basis of price and quality 

rather than on their ability to underwrite those who need insurance the most: people with preexisting health conditions. 

The Affordable Care Act also creates transparency, a key component of a healthy competitive market. state health insurance exchanges provide transparency to consumers who can make applesto-apples comparisons of coverage options and allow people to understand in plain English what they are buying and how it will 

protect their families. 

The Affordable Care Act ensures that consumers get the benefit 

of a core set of consumer protections, protections that are critical 

to a well-functioning market. In 2014 insurers will be barred from 

denying coverage on the basis of health status and consumers will 

have high-quality coverage. 

The Affordable Care Act also provides key protections and benefits that have already taken effect, such as the prohibition on rescissions and bans on lifetime limits on insurance coverage. We 

11 

also expanded access to care for young people by providing coverage for dependents up to age 26 on their parents’ policies, a benefit to over 600,000 young adults already. 

In addition to the provisions of the Affordable Care Act, many 

states also have basic consumer protections, including reasonable 

rating bands or corridors, and restrictions on underwriting. These 

ensure that people with medical conditions are not excluded from 

insurance coverage. 

Many states also have laws to ensure consumers have access to 

an adequate network of specialists and other health care providers, 

and many have mechanisms to deal with complaints consumers 

might have in dealing with their insurance company. The Affordable Care Act allows consumers to continue utilizing the staff of 

these state insurance commissioners when they have issues, concerns, or questions. 

Speaking from my firsthand experience as a state insurance commissioner for 6 years and also director of CCIIO, the proposition of 

allowing interstate sales of insurance in a way that eliminates or 

overrides a state’s own authority to protect or assist insurance consumers in their market is, while well-intentioned, a step backward 

in the effort to provide accessible, affordable, and fair health insurance coverage to all citizens. 

Allowing insurers to pick the state they want to be regulated in 

provides the insurers the choice of which state laws they have to 

comply with. Insurers can then issue policies with fewer benefits 

or protections in other states that otherwise would not allow such 

policies. The laws of the issuing state become a ceiling or a cap for 

other states. This will likely lead to cherry-picking of healthy 

groups and individuals. And we know from experience that when 

we segregate risk pools by selectively selling policies with thinner 

or fewer benefits, we drive premiums up for the rest of the population. state insurance regulators, legislators, and governors would 

be powerless to try and fix this, because they would have no jurisdiction over these policies. 

In addition, proposals that preempt state insurance laws in one 

state with those of another leave consumers at a disadvantage. 

state insurance regulators often provide key consumer assistance to 

residents of their states. The state regulators were no longer able 

to provide these services to purchasers of interstate policies. Consumers in one part of the country would be dependent on the time 

and resources of a state regulator thousands of miles away. It is 

likely many consumer complaints or problems would be 

unaddressed. 

Insurers can already sell insurance across state lines so long as 

they comply with state laws. Many companies today operate and 

provide insurance in multiple states. 

In summary, the Affordable Care Act has increased consumer 

protections and will lead to more affordable comprehensive insurance options. Interstate sales where the laws of one state preempt 

those of another would leave many consumers with less affordable 

coverage and no one to turn to if any needed help navigating the 

market. Thank you. 

Mr. PITTS. The chair thanks the gentleman. 

[The prepared statement of Mr. Larsen follows:] 

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Mr. PITTS. Dr. Parente, you are recognized for 5 minutes for your 

statement. 

STATEMENT OF STEPHEN PARENTE 

Mr. PARENTE. Thank you, Congressman Pitts and members of 

the committee, for this opportunity to speak to you today. My name 

is Steve Parente. I hold the Minnesota Insurance Industry Chair 

in health finance at the University of Minnesota. I am there to 

serve as a professor in the finance department as well as running 

a medical industry MBA program. 

My areas of expertise are health economics, health insurance, 

and medical technology evaluation. Most recently I and my colleagues Roger Feldman, Jean Abraham, and Wendy Xu at Minnesota completed a study on the impact of allowing consumers to 

purchase health insurance across state lines. This peer-reviewed 

study was accepted for publication last winter and is forthcoming 

in the Journal of Risk and Insurance. 

And on a side note, I must say that the deliberations of this committee 5 years ago were the inspiration for that publication. I have 

provided a copy of that publication with my remarks for your consideration. 

In this study we find evidence of a significant opportunity to reduce the number of uninsured under a proposal to allow the purchase of individual health insurance across state lines, using three 

different policy scenarios. 

First, the best scenario to reduce the uninsured numerically is 

competition among all 50 states where one or more states emerge 

as dominant players. This scenario would yield a reduction in the 

uninsured by 8.1 million people. 

With all due respect to Congressman Waxman, insurers don’t 

like this because it puts them at civil war with each other. That 

is one reason this has not moved forwa rd. This idea is not without 

precedent outside health care delivery, where Delaware has become 

the most favored state for incorporating a firm. 

Second, the most pragmatic scenario with a good impact is one 

state dominating each regional market. In this case the uninsured 

will be reduced by 7.4 million. This is a compromise, since the U.S. 

health insurance industry is only at halfway national, through national employers contracting with insurers through ERISA. This 

could provide a practical more politically palatable approach to getting coverage. 

Third, the five largest states scenario is the least effective policy 

for increasing the number of insured people. This is likely due to 

the fact that only one state of the five, Texas, has a combined regulatory burden that is less than the 50 percentile of all states. The 

estimated reduction from the five large state scenario is 4.4 million 

individuals. 

It is important to note that these reductions in the uninsured 

could be achieved without the premium subsidies or Medicaid expansion policies prescribed in ACA. In the paper we did model the 

impact of combining interstate purchase of insurance with subsidies for private insurance, and found additional reductions in the 

uninsured were possible, in many cases doubling the reductions, albeit this could happen at considerable cost, though. 

21 

The changes we found also took into consideration the different 

market prices between communities for medical care. For example, 

cost of living for nurses in Manhattan are higher than those living 

in Missouri. These differences were factored out. 

As a result, the impact is almost entirely due to the differences 

in the regulatory burden and mandates between the states. In one 

of the most telling illustrations, we found premium quotes for the 

same family, from the same insurance company, for the same insurance benefit, to be twice as expensive in a Jersey town, 

Lambertville, compared to New Hope, Pennsylvania. These two 

towns are separated by a quarter mile of Delaware River, but their 

citizens are likely to use many of the same doctors and hospitals. 

It is understood that policy simulation simplify many political 

barriers, but the opportunity costs of not allowing interstate sales 

might motivate the development of legislative contractual agreements to provide regulatory powers between primary and secondary states. This could be consistent with the exchange policy as 

well. Of course adequate disclosure to consumers of the primary 

and secondary states’ obligations would be paramount for this to 

work. 

One possible outcome is that consumers who buy insurance in 

one state but live in another could have two insurance regulators 

looking out for them rather than just one. This would address a 

substantial concern that de-mandating the market could leave consumers without adequate consumer protection. At the same time, 

with the effect of mandates on premiums substantially reduces the 

probability that someone would buy insurance. One must ask, 

which is the worst outcome; lack of coverage for a given service, or 

no coverage at all due to higher premiums from mandates? 

Although we modeled the personal level impact of a national 

market on coverage, we are unable to assess the impact of such a 

migration on provider access as well as quality. Nevertheless, a national market could lead to substantially more health insurance, 

even those with chronic conditions and preexisting conditions. In 

addition, the development of a national market requires no additional Federal resources, other than the support for the legislation, 

to permit the development of such a change. 

In closing I hope these new findings will be considered by the 

Congressional Budget Office if and when this topic is considered 

formally. CBO frequently uses peer-reviewed studies as a basis for 

policy impact. I hope this new study will be considered and that 

any opportunity with such potential to reduce the uninsured gets 

serious consideration amidst the fiscal constraints that can handicap so many of the other coming health reforms to be implemented 

under the Affordable Care Act in 2014. Thank you. 

Mr. PITTS. The chair thanks the gentleman. 

[The prepared statement of Mr. Parente follows:] 

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Mr. PITTS. I recognize Ms. Herrera for 5 minutes for an opening 

statement. 

STATEMENT OF CHRISTIE HERRERA 

Ms. HERRERA. Thank you, Mr. Chairman. It is a pleasure to be 

before the subcommittee today, I am Christie Herrera. I am director of the Health and Human Services Task Force at the American 

Legislative Exchange Council, or ALEC. ALEC is a nationwide nonpartisan organization of state lawmakers. We have nearly 2,000 

legislator members across the country, about a third of all legislators nationwide. 

Today I will briefly address how an interstate market could bring 

about affordability, innovation, and choice. And I will also discuss 

some nascent state proposals that have already been mentioned 

here: Wyoming, Georgia, Maine, Arizona, and Oklahoma. 

Simply put, our Nation faces a crisis of the uninsured. One in six 

Americans lacks health coverage and increasing numbers either 

can’t afford it or choose not to purchase it at all. Many states are 

considering legislation to allow the purchase of health insurance 

across state lines. ALEC believes that these are promising proposals that could bring about affordability, innovation, and choice. 

First, affordability. Many Americans live in states where highcost health insurance is the only option and where more affordable 

plans can be found just across the state line. 

Innovation. When we open up these coverage options, individuals 

could benefit from innovative plans in other states, and state lawmakers could benefit from new ideas in other states while maintaining core consumer protections in their own state. 

Choice,, people could choose more customized health plans that 

meet their health needs. As has been mentioned, each state imposes mandates that require individuals to purchase coverage for 

specific benefits, procedures, or providers in order to purchase 

health insurance coverage at all. 

While mandates may make more coverage more comprehensive, 

they also make it more expensive, and it can price people out of 

the market altogether. An interstate market could allow people to 

purchase out-of-state coverage with fewer mandates or allow people 

to top-up for richer coverage in another state. 

ALEC is generally supportive of any proposal to allow the purchase of health insurance across state lines. However, ALEC believes that it is the states that are best equipped to develop and 

implement this kind of targeted health reform solution. First, the 

states are both constitutionally and statutorily authorized to have 

primary regulatory authority over health insurance; but more importantly, we believe that states can develop their own policies that 

reflect their own unique circumstances and this kind of pluralistic 

state approach can yield best practices with implementation. 

We began tracking state-level legislative activity in 2007 when 

our legislators adopted Model Health Care Choice Act for states. 

This is state-based model legislation that vests authority in the 

state’s insurance commissioner to allow the sale of health insurance across state lines. In 2011, 15 states considered this legislation. 

28 

Last year Wyoming became the first state to enact this kind of 

legislation. Wyoming’s law would establish a multistate consortium 

that would establish reciprocity agreements for the approval, sale, 

offer and structure of health insurance plans. This month Georgia 

and Maine became the second and third states to allow cross-border purchasing of health insurance. In both states, individuals who 

apply for an out-of-state policy will receive a disclaimer noting 

which state’s laws govern benefits in underwriting. Georgia’s law 

gives wide latitude to a state’s insurance commissioner to qualify 

the sale of out-of-state plans. And it also allows Georgia’s own insurers to sell products that are similar to those out-of-state plans. 

Maine’s law establishes what are called regional insurers, 

headquartered in Connecticut, Massachusetts, New Hampshire or 

Rhode Island, and it allows these regional insurers to sell insurance policies in Maine. These out-of-state plans must comply with 

the individual health insurance laws of its home state and also 

comply with Maine’s consumer protections. 

Also of note are the Arizona and Oklahoma approaches that 

would respectively open Arizona to a 50-state market for health insurance and allow Oklahoma’s Governor to negotiate interstate 

compacts in this area. 

In conclusion, ALEC believes in the promise of these state-based 

initiatives because they can help many Americans choose affordable, innovative, and customized health insurance coverage across 

state lines. These state-level reforms have only just begun, and 

now is the time for the states to develop these proposals, to glean 

best practices for implementation, and hopefully to demonstrate 

success. Thank you. 

Mr. PITTS. The Chair thanks the gentlelady. 

[The prepared statement of Ms. Herrera follows:] 

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Mr. PITT. I now recognize the gentleman Mr. Finan for 5 minutes 

for an opening statement. 

STATEMENT OF STEPHEN FINAN 

Mr. FINAN. Good morning, Mr. Chairman, Ranking Member 

Pallone, and distinguished members of the committee. I am Stephen Finan, Senior Director of Policy at the American Cancer Society, Cancer Action Network, which is the advocacy affiliate of the 

American Cancer Society. 

ACS CAN is grateful for the committee’s invitation to speak to 

the issue of interstate sales of health insurance and its potential 

impact on consumers. Insurance issues are inherently complex and 

often dense, so I would like to explain the issue through the cancer 

lens: how the concept might ultimately affect cancer patients and 

survivors. 

Cancer death rates have decreased by 21 percent among men 

and 12 percent among women since the early 1990s. Despite the 

significant progress, the American Cancer Society concluded that 

its long-term goals of significantly reducing the incidence and mortality of cancer cannot be achieved unless the significant coverage 

gaps that exist within the current health care system are addressed. 

Although major advances have been achieved through research 

in the fight against cancer, too many advances are not being realized by actual patients because of major shortcomings in our Nation’s health delivery system. For example, we know that the lack 

of insurance coverage means later diagnosis, worse outcomes, and 

thus often higher costs among cancer patients. Even among those 

with private insurance, many cancer patients are underinsured, 

meaning their coverage did not provide for all the necessary and 

appropriate medical treatment. 

Many underinsured are left with the extraordinary dilemma of 

either incurring serious and potentially ruinous out-of-pocket financial expenses to obtain necessary treatment or curtailing essential 

treatment, thereby putting their health and possibly their lives in 

jeopardy. The problem of paying costly medical bills directly affects 

middle-class families, particularly those with chronic diseases. 

The overriding purpose of any insurance reform must be—the 

overriding purpose of any reform must be to improve the Nation’s 

health for all its citizens. From a consumer perspective, interstate 

sales offer the theoretical potential of greater choice and lower 

prices. In fact, this potential will be real under the Affordable Care 

Act if states choose to participate in multistate exchanges or interstate compacts. However, the work-in-practice interstate sales must 

be built on a foundation that prevents predatory practices and unfair predatory practices, with strong consumer rights and enforcement protections firmly in place. 

The ACA fundamentally alters the rules of the health insurance 

market to work for consumers and, by extension, the Nation’s 

health and well-being. Moreover, the Affordable Care Act changes 

the insurance market rules in a manner that significantly enhances 

its competition by creating a level playing field. Among the most 

important changes, all insurers must provide access to coverage regardless of health status. 

43 

All plans must include benefits to help cover adequately a serious medical condition like cancer. Evidence-based prevention services must be included in all health plans. Financial assistance to 

purchase health insurance is essential for many Americans because 

without it, directly or indirectly, the taxpayer winds up paying the 

remaining costs. 

The administrative process of insurance needs to be simplified 

and standardized. To have a truly consumer-driven, competitive 

market, people must have easy and essentially free access to comprehensible information so that they can make informed decisions. 

These conditions exist today for virtually every consumer product, 

but they don’t exist for one of the most important products in our 

lives: health insurance. 

Risk adjustment must be an inherent part of any private health 

insurance. A great good risk adjustment system will reward insurers for finding efficient ways to provide quality care to all health 

risks, rather than trying to avoid risk. This is the proper way to 

harness competition to the benefit of the consumers and our Nation. 

And finally, last but not least, interstate sales, that are currently 

built on a state-based system, you must change the foundations. 

The consumer protections do exist across state lines and there is 

adequate means of enforcement and redress. 

The general concept of interstate sales of health insurance is consistent with the overall trending consumer products in recent 

years, especially with the growth of the Internet. Competition 

across state lines in many consumer product areas often benefit the 

consumers through greater choice and lower prices. 

So the question is, why wouldn’t the same be true for health insurance? Unlike other health consumer products, many insurers 

don’t always want to sell their product to any consumer. Their 

business model is built around not selling to all applicants. The 

strategy is very simple and clear. 

Health claims highly skewed. Roughly 20 percent of the people 

pay for 80 percent of cost. If an insurer can avoid that 20 percent 

they would still have a huge market, but they avoided virtually all 

the costs. This in turn would allow them to provide the opportunity 

to sell insurance relatively cheaply to a large market of healthy 

people. The side effect would be that high-risk people like cancer 

patients are left out, are left in pools with extraordinarily high 

costs. The competitive pressures of unregulated interstate sales 

would almost certainly force insurers to embrace the highly discriminatory tactics of cherry-picking. If some insurers cherry-pick 

the lower costs of the market, the remaining insurers are left with 

pools that are at a disproportionately high risk compared to competitors. 

Let me just conclude by saying it is imperative that we not jump 

to the conclusion that the high cost of health insurance today is 

simply a function of too little competition or too much regulation. 

Interstate sales of health insurance could nominally increase competition at lower price. However, a highly competitive market without good, uniform rules will simply become a faster race to the bottom. The relatively young and healthy pool benefit, but the consequence would be foreclosure of access to or affordability of covVerDate Nov 24 2008 10:38 Feb 06, 2012 Jkt 037690 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-50 052511\112-50 CHRIS
44 

erage for those with serious medical conditions like cancer. We do 

not believe that this is the intent of the law or the idea, but it 

could happen and that clearly would be an unacceptable outcome. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. 

[The prepared statement of Mr. Finan follows:] 

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Mr. PITTS. The chair recognizes Dr. Howard for 5 minutes for an 

opening statement. 

STATEMENT OF PAUL HOWARD 

Mr. HOWARD. First I would like to thank Chairman Pitts and 

Ranking Member Pallone for holding the hearing today on the important topic of interstate insurance competition. I am speaking 

today in my capacity as director and senior fellow at the Manhattan Institute’s Center for Medical Progress, from my experience 

writing and researching on health care policy issues, and from 

speaking to health insurance stakeholders, including large and 

small employers, insurers, and consumers about the challenges facing the market today. 

There is no doubt that the single most important issue facing 

American health care is the high and rapidly rising cost of that 

care; and, directly related to it, the high cost of health insurance. 

The high cost of care is the primary reason why many Americans 

lack health insurance since they cannot find affordable coverage 

that meets their needs, and why more employers are dropping coverage in the face of unsustainable cost increases. 

The forces driving health care inflation are not the villains we 

hear of on the campaign trail. Bad incentives, not greedy corporations, are primarily to blame; namely, the unlimited tax deduction 

for employer-provided health insurance; the dominance of fee-forservice reimbursement system; and, most importantly for our discussion this morning, government regulations of insurance around 

health care markets that actively deter competition that might 

offer lower cost but still high-quality products to consumers. 

State insurance regulations often mimic the coverage of provider 

services or insurance benefits in the name of consumer protection, 

when in reality what such mandates provide is provider protection, 

or, I should say, provider income protection. 

Legislators often justify additional mandates by pointing to anecdotes for coverage of a particular service or provider that appear, 

at least after the fact, to be critical to the health and well-being 

of a particular policyholder. But legislation via anecdote is not a 

justification for adding additional costs to standard insurance packages, particularly when increasing the cost of those packages inevitably prices some consumers out of the market because they can 

not afford to buy the Cadillac coverage that legislators or the providers who argue for such coverage believe we must offer. 

Different consumers will have different preferences for insurance 

coverage and terms. A 25-year-old male may opt for very different 

insurance than a 38-year old father of two. Telling a younger man 

that he must opt for the older man’s coverage is likely to price him 

out of the market entirely. 

Creating a viable interstate insurance market will begin the vital 

process of making the marginal cost of regulation transparent to 

uninsured individuals who are in the most need of more affordable 

insurance options. It may also spur innovation in insurance products as states compete to offer the best combination of cost and coverage terms. This is exactly the type of competition that we should 

be encouraging in health care and health insurance markets. 

60 

Objections to the interstate sale of health insurance rest on a 

purported race to the bottom that would supposedly ensue if consumers could purchase across state lines. However, under legislation like the Health Care Choice Act, products sold in a secondary 

state would also have to be sold within their primary state. Policymakers and insurance regulators in the primary state would have 

powerful incentive to ensure that such coverage sold to their own 

residents was not deceptive and of high quality. 

Also insurance departments in the secondary state could still collect premium taxes at high-risk pool assessments from plans sold 

across state borders, ensuring the financing necessary to maintain 

important consumer protections and support state high-risk pools. 

Also, although under McCarran-Ferguson, states have the primary responsibility for regulating insurance sold to their residents, 

employers that sell fund health insurance coverage under ERISA 

are not subject to state regulation. More Americans receive coverage that is exempt from state regulation, about 90 million lives, 

than receive regulation that is subject to both Federal and state 

regulations, about 70 million. 

Insurance regulation under ERISA has been generally light; indeed, employers have nearly complete freedom under ERISA to design their own insurance coverage, and employees are overwhelming happy with the quality of employer-provided coverage. 

Since there has been no race to the bottom in the ERISA-protected 

market, it is unlikely to occur in a national market for health insurance. 

Policymakers should also not forget rising health care costs are 

the single greatest barrier to accessing health insurance for uninsured individuals regardless of health status, and that reducing 

unsustainable health care cost increases is the single most important thing we can do to ensure that coverage remains affordable. 

Mandating Cadillac coverage is the only option for individuals 

locked into expensive state markets is the surest way to continue 

the vicious cycle of cost increases, dropped coverage, and large and 

expensive increases in public coverage in programs like Medicaid. 

Thank you for the opportunity to comment on this important 

issue, and I look forward to your questions. 

Mr. PITTS. The chair thanks the gentleman. 

[The prepared statement of Mr. Howard follows:] 

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Mr. PITTS. Thanks to the panel for your opening statements. 

I will now begin the questioning. I recognize myself for 5 minutes. Dr. Howard, we will start with you. 

Some of my colleagues on the other side of the aisle have argued 

that imposing individual mandates will lower premiums for everyone by promoting larger risk pools and discouraging emergency 

room utilization. Have we seen any evidence of lower premiums or 

decreased our utilization in Massachusetts? 

Mr. HOWARD. No. What you have seen in Massachusetts is that 

ER use has actually gone up, despite the expansion of coverage 

there to nearly the entire population, and costs have not gone 

down. Massachusetts insurance costs have continued to go up and 

it continues to lead the Nation in health insurance premiums. So 

it is both a highly regulated state and a high-cost state, and individuals have not been able to find more affordable coverage outside 

of Massachusetts Commonwealth Care Program, which is extraordinarily heavily subsidized insurance. So the market has remained 

very expensive. It is extraordinarily costly for both the state and 

individuals. 

Mr. PITTS. Dr. Parente, do the regulations of guarantee issue and 

community rating penalize people that have been responsible and 

purchased insurance before they were sick? 

Mr. PARENTE. Absolutely. In our models and from the literature 

that has come out before our study, the biggest thing the community rating and guarantee issue do is push up the premium cost. 

It is just automatically what an insurance actuary does when they 

factor in the price. And if someone had been on the insurance policy and suddenly they had that mandate that comes on and says 

now they are a community-rated state, they are likely to be seeing 

a premium increase, by no fault of their own, of 20 to 25 percent, 

sometimes as much as 30 percent, just to in effect spread that risk 

by the imposition of that policy component. If you want to see that 

illustration, go to New York where the individual insurance market 

has been decimated by the combination of community rating and 

guarantee issue over the last 10 years. 

Mr. PITTS. If you would continue, Dr. Parente, would the optimum policy goal be to have a system where consumers have more 

choice, are encouraged to buy insurance when they are healthy, 

and provide a safety net with those with preexisting conditions, be 

able to purchase affordable coverage through functioning high-risk 

pools? Would that be a lot cheaper to accomplish than PPACA? 

Mr. PARENTE. That would be the ideal. The logistical challenge 

is to make sure that the folks that are vulnerable and don’t buy 

coverage, that lose coverage because of preexisting conditions, have 

that high-risk pool that is available to them. 

Minnesota actually has that in place. They have had a high-risk 

pool designed very successfully since 1978. It is probably associated 

with about half of what would otherwise be folks who are uninsured because of that design. If that type of design was available 

more commonly across the U.S., it could actually be quite effective. 

What is nice about the interstate policy is what it does is it levels 

the playing field in terms of letting people shop freely across states, 

potentially electronically; ehealthinsurance.com has shown that 

that can be done quite easily. And then for those who may be in 

67 

a vulnerable situation, as long as they are identified, they can essentially apply for premium subsidy support and essentially get it 

either through a state high-risk pool design or some other type of 

system. 

Mr. PITTS. Ms. Herrera, you mentioned Georgia. Georgia recently 

enacted a law to allow the purchase of health coverage across state 

lines. Can you give us an idea of how many states Georgia residents can now buy more affordable coverage from? 

Ms. HERRERA. Absolutely. In the case of Georgia, it shares a border with Alabama, which has a relatively low number of mandates 

and a relatively lightly regulated health insurance market. Premiums are lower. So for folks in Georgia who are uninsured, allowing them to go over to Alabama to buy a more affordable policy 

would be good. 

However, Georgia also shares a border with Florida, which has 

mandate-rich coverage and many consumer protections. Folks in 

Georgia looking for those options could buy from Florida as well. 

Mr. PITTS. Could you elaborate on the effects on coverage in New 

York after PPACA-like reforms such as guaranteed issue and community rating were adopted? 

Ms. HERRERA. I am not familiar with the New York market. 

Mr. PITTS. Dr. Parente, can you elaborate on that? 

Mr. PARENTE. Actually, Dr. Howard and I did a study that came 

out last year that more or less showed that when that legislation 

was changed in the mid-1990s it pretty much took a functioning individual insurance market with a several hundred thousand individuals and reduced it now to I think close to less than 100,000 

people, 50,000 people in the private insurance market. There was 

additional state subsidy components that came in place, but the 

cost to New York to put that subsidy program in place ended up 

being net expensive and potentially putting many New Yorkers in 

a much more vulnerable position. 

When we have done simulation models using the same models in 

the study showing what would happen if New Yorkers could buy 

from Pennsylvania and Connecticut, it potentially could reduce the 

uninsured for that population affected by half. 

Mr. PITTS. Thank you. My time has expired. 

The chair recognizes the ranking member for 5 minutes for questions, Mr. Pallone. 

Mr. PALLONE. Thank you, Mr. Chairman. 

I ask unanimous consent to have Mr. Green participate in the 

questions and answers, Mr. Chairman. 

Mr. PITTS. Without objection, so ordered. 

Mr. PALLONE. I wanted to start with Mr. Larsen. 

Mr. Larsen, I would like to discuss with you some of the effects 

that H.R. 371 or a similar proposal might have on state governance 

in the insurance market. You probably know that Arizona Governor Jan Brewer recently vetoed legislation that would allow outof-state carriers to sell policies in Arizona. 

Mr. Chairman, I would ask unanimous consent to enter the veto 

message of Governor Brewer into the record. I don’t know if you 

have it. 

Mr. PITTS. We have it. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

68 

Mr. PALLONE. Is it your understanding that the proposal like 

H.R. 371 would vacate the state of Arizona’s decision and in essence overturn the Governor’s decision? 

Mr. LARSEN. That is my understanding, yes. 

Mr. PALLONE. OK. Governor Brewer, when she vetoed the bill 

last month allowing selling insurance across state lines, she said 

in the message—and that was what I just entered into the record— 

she said she ‘‘is concerned about risk to our citizens who may be 

subject to other states’ regulatory procedures that could leave them 

with little recourse in the event of mistreatment.’’ 

Recalling your days when you were the insurance commissioner 

for Maryland, did you, for example, have enough money in your 

budget to assist consumers in other states if a plan licensed in your 

state was causing problems for them elsewhere? 

Mr. LARSEN. It was always a challenge to get funding for our department, so it would have been difficult to handle the complaints 

from any number of other states. 

Mr. PALLONE. But wouldn’t we end up with more sham plans on 

the marketplace and more consumers in trouble, essentially? 

Mr. LARSEN. I think it certainly creates that possibility. It is very 

likely, yes. 

Mr. PALLONE. Is there anything in your experience at HHS that 

leads you to believe that it would be a good idea for the Federal 

Government to preempt all state insurance laws subject to the 

whims of insurance companies? 

Mr. LARSEN. For states or the Federal Government? 

Mr. PALLONE. For the Federal Government to preempt all the 

state insurance laws? 

Mr. LARSEN. No. 

Mr. PALLONE. I will ask you and also Mr. Finan, if I could. I am 

concerned under this legislation, Ms. Blackburn’s legislation, or 

something similar, the incentive would be for insurance companies 

to choose to locate in the state with the least amount of protections 

and the least amount of oversight of the industry. 

So let me ask Mr. Larsen first, do you believe that insurers 

would rush to sell products from the single state with least possible 

consumer protections and other requirements? 

Mr. LARSEN. I do. 

Mr. PALLONE. And then, Mr. Finan, how would this affect the individual health insurance market in most states? Because you 

know a number of states require insurance companies to offer coverage to everyone in their state, the guaranteed issue, and some 

states require insurance companies to offer that coverage at one 

rate, community rating. What effect do you think that Ms. 

Blackburn’s bill would have on those in most need of health care 

services in these states, for example, people with cancer? 

Mr. FINAN. There is no question that without a level playing 

field, without standardized rules across the market, it will be a 

race to the bottom. states will—excuse me, insurance companies 

will migrate to the least regulated states. And, as I said in my testimony, without a guaranteed issue, they will cherry-pick, and 

therefore they will be looking to pick off from other states the best 

risk. They will offer minimal benefit packages. The cost will be 

very low. 

69 

We know today that the consumers, most consumers, the consumer literacy about health insurance is extremely low. They buy 

in price. So they see a product across state lines with a low price 

and they say, yes, that is great. But the reality is, particularly for 

cancer patients, is they are not going to be able to buy across state 

lines. Insurers won’t accept them. They don’t have to. And they are 

going to be left behind in their states with smaller risk pools with 

much higher risks. And the costs will be extraordinarily high, 

where you are going to end up with a bifurcated system where the 

young and healthy can do very, very well, but those, once they become sick, wind up in high-risk pools where the access to insurance 

is either not available because it is denied or it is beyond their 

reach. 

But let me just end by saying the reality is that most of us sooner or later will get sick. One in two men and one in three women 

will ultimately have cancer. And that means there is a good 

chance, particularly for those in the individual market, someday, 

when they most need it, they are going to be without it. 

Mr. PALLONE. Let me just ask one more thing. You know, I am 

worried that legislation like Ms. Blackburn’s would have a disproportionately negative impact on older Americans or near elderly. 

How would this bill affect the near elderly? What do you think it 

would mean? 

Mr. FINAN. Again, it benefits the young and healthy. But, as you 

get older, the costs do correlate with age. As we get older, the costs 

rise. 

And in the case of cancer, cancer is a disease of the aged. So, 

therefore, your chances of getting cancer increases as you get older. 

And for people say in their 50s and 60s, pre-Medicare, this becomes 

highly problematic, because at that point they have no choice, and 

they don’t have the means or access to find alternatives. And we 

see too often many people in their 50s and 60s struggling to get 

through until they can get Medicare coverage. 

Mr. PALLONE. Thank you. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman; and the chair recognizes the gentleman from Illinois, Mr. Shimkus, for 5 minutes for 

questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

I appreciate you all being here today. It is really good to sit and 

listen, because, obviously, there are differing views. 

I would just take issue, Mr. Finan, by saying that what is more 

critical to the individual who has cancer is when they have no insurance. 

This whole debate is having quality, accessible, low-cost insurance; and the debate is really the mandates on issues that may not 

deal with the catastrophic issues of health care delivery. In my 

opening statement I deal with contraceptive coverage. That prices 

people—if it is 1 percent per mandate and you have 30 mandates, 

you have a 30 percent increase on private health insurance. 

I love ALEC, and I appreciate their position. I have got in your 

testimony individual health policies as low as $110.05 in Iowa, 

compared to New York which is $339.60. That is a huge difference. 

70 

Are we saying that the folks in Iowa have sham plans? Ms. Herrera, is that a sham plan? 

Ms. HERRERA. Absolutely not. 

Mr. SHIMKUS. You mean the folks in Iowa are not supporting 

sham plans that their constituents—it is not just a payoff to the 

insurance industry? These are quality health insurance plans that 

cover catastrophic issues. 

Ms. HERRERA. That is a great point. I think that is the beauty 

of this kind of proposal. As Dr. Parente mentioned in his testimony, 

you not only have your insurance regulator, commissioner, looking 

out for you, but you also have the insurance commissioner of the 

insurer’s home state. So we are adding up these layers of protection 

as we open up the market. 

Mr. SHIMKUS. And Iowa borders my state of Illinois. Illinois’ individual policy averages about—and this is in your testimony— 

$161.16. This is a monthly. So you multiply that by 12. 

So the issue is affordable, accessible, quality catastrophic coverage, unencumbered by things that you may not want to have covered. That is kind of this debate, from my perspective. Obviously, 

other people have different perspectives. 

Let me move to—— 

Mr. FINAN. Congressman, may I—— 

Mr. SHIMKUS. No, I have got 2 minutes and 30 seconds left, and 

I need to get to this. I want to go to Mr. Larsen. 

The Secretary of HHS with your counsel will be charged with determining what benefits must be in a health plan purchased by my 

constituents, is that correct? 

Mr. LARSEN. There is a requirement in the Affordable Care Act 

that we will define what are called essential health benefits. 

Mr. SHIMKUS. So you will be in this mandate debate, too. 

Mr. LARSEN. I am not sure if we call it a mandate debate, 

but—— 

Mr. SHIMKUS. Well, it will be if you determine what is in the essential package. That was part of our debate on this whole—why 

a lot of us opposed it. Because if you get into now a national standard that adds mandates that the individual consumer may now be 

forced to purchase because of the new health care law, we are in 

the same boat as this entire debate. 

Mr. LARSEN. I would say it is different in this respect. First, to 

focus on the terminology, these are essential health benefits. 

Mr. SHIMKUS. Well, I think the state of Illinois has decided that 

contraceptive coverage is an essential health benefit, and I would 

argue that a lot of my constituents do not think so, nor do they 

want to pay for that. So I would be very, very careful as you all 

move forward to make sure that it is essential—I would say catastrophic coverage would be essential. What you are doing now is 

part of this mandate debate. 

Let me move to another question real quick. Secretary Sebelius 

has stated that the fraud and abuse in our medical system increases costs. Do you agree with that assessment? 

Mr. LARSEN. I think, yes, we can reduce costs through doing an 

improved job of ferreting out fraud and abuse. Yes. 

Mr. SHIMKUS. So part of the health care plan is going to have 

a huge focus on ferreting out waste, fraud, and abuse. 

71 

Mr. LARSEN. Yes. 

Mr. SHIMKUS. And with your attention and the Secretary’s attentive focus on this. 

Mr. LARSEN. Yes. 

Mr. SHIMKUS. Good. Great. Thanks. 

With 30 seconds remaining, you also mention that patients in 

non-grandfathered plans now have greater freedom to choose their 

own doctor. Section 1311(h) of the health care law, page 78 in the 

yellow book that is on the table there, authorizes HHS to issue regulations that would prohibit health plans from contracting with 

certain physicians, is that correct? 

Mr. LARSEN. I apologize, I am not quite sure what you are saying. 

Mr. SHIMKUS. Well, I am done. Maybe one of my colleagues will 

follow up. It is page 78. The health care law is right there. You are 

welcome to grab it. I think your health care law will allow HHS 

to deny individuals access to the doctor of their choice. 

I yield back. 

Mr. PITTS. The chair thanks the gentleman and recognizes the 

ranking member emeritus, Mr. Dingell, for 5 minutes for questions. 

Mr. DINGELL. Mr. Chairman, I thank you for your courtesy. The 

French have a great saying: The more things change, the more 

they are the same. 

I have seen this before. About 20 years ago, this committee went 

into the matter of mischief rascality in interstate sales in insurance, and it was a scandalous thing to behold. And we found the 

state regulatory agencies didn’t have the authority to address it, 

that they couldn’t address it, and they wouldn’t address it. 

Beyond that, we found something else. We found that folks were 

traveling around the country with suitcases full of cash running off 

to the Cayman Islands and all kinds of other places, that places 

like Louisiana and Texas, next-door neighbors, couldn’t deal with 

their problems of enforcing the laws. It was a terrible mess. And 

insurance ratepayers were getting skimmed left and right, and 

commissioners of insurance came into this committee to complain 

about the fact that this was going on. 

So I can see that the insurance companies have been busy, and 

I can see they are looking forward to cutting a fat hog, which this 

bill will permit. So I have a few questions here. 

So, to Director Larsen, please answer yes or no. Section 2796 of 

H.R. 371, the Health Care Choices Act of 2011, would exempt 

health insurers in a secondary state from complying with any state 

law regarding fraud and abuse other than those that meet the definition in section 2795. I am concerned that the definition of fraud 

and abuse in H.R. 371 is so high states would find it nearly impossible to prosecute an insurer for fraud and abuse, thereby opening 

wide the door to fraudulent activity. Now, do you agree with that 

statement, yes or no? 

Mr. LARSEN. Yes. 

Mr. DINGELL. All right. I happen to believe that H.R. 371 would 

increase the opportunity for rascality, particularly due to lack of 

enforcement authority and oversight tools, and, as Mr. Pallone has 

pointed out, money and the capabilities to deal with these things 

that would be available in the secondary state. These states would 

72 

be unable to revoke the license of an out-of-state insurer if they 

were found to be acting fraudulently; and, without this type of tool 

to discourage abuse, I am curious how a secondary state could in 

fact protect their constituents. 

Again, as a former insurance commissioner, do you believe that 

a secondary state would be able to audit an insurer’s license in another state under H.R. 371, yes or no? 

Mr. LARSEN. I am sorry, that they would or would not be able 

to audit? 

Mr. DINGELL. Say it again? 

Mr. LARSEN. Well, let me answer this way: I think that provision 

of the law would give me great pause as a former commission in 

my ability to oversee. 

Mr. DINGELL. It would be a wonderful opportunity for rascals 

and rascality. 

Further, if a secondary state found that an insurer acted fraudulent in their state, do you believe again that H.R. 371 would allow 

a Secretary of a secondary state to prevent the insurer that acted 

fraudulently from operating within their boundaries? Yes or no? 

Mr. LARSEN. I think it would be difficult, yes. 

Mr. DINGELL. Now, Mr. Finan, it is clear that one of the side effects of this bill will be a race to the bottom, and insurance companies will be huddling up in the states with the most lenient regulations. For example, under current law, if a constituent of mine suffering from breast cancer has a complaint about their insurer not 

covering the cancer treatment recommended by their oncologist, my 

office could help them receive recourse through the Michigan Insurance Commissioner. 

I am curious how my office would handle such requests under 

H.R. 371. If a constituent purchased their inadequate insurance in 

Iowa, am I to expect that the Iowa Insurance Commissioner is 

going to regulate this insurer? I happen to think that this puts too 

much hope and trust in the insurance industry and in a ramshackle system of regulation. I previously told my friends on this 

committee this would be like using one pat of butter for a whole 

loaf of bread. 

Is it your opinion, Mr. Finan, that you believe that one state or 

even a small group of states would be equipped to handle the concerns and complaints of residents of a neighboring state? 

Mr. FINAN. We are deeply concerned about the ability of any 

state insurance department to enforce or act across state lines. 

Mr. DINGLE. Thank you. 

Now, one of the biggest accomplishments of The Affordable Care 

Act is that consumer protections make up what is called the Patient’s Bill of Rights. H.R. 371 would repeal these protections, leaving consumers once again vulnerable to lifetime limits, annual limits, discrimination for pre-existing coverage, limited health benefits, and rescissions. I tend to believe that repealing these protections would enable the insurance companies to discourage or prevent those suffering from cancer or other illness from entering 

their pool. 

Do you agree with this assessment, yes or no? 

Mr. FINAN. Absolutely. 

Mr. DINGELL. Thank you. 

73 

Mr. Chairman, I thank you for your kindness. I think we have 

a bad bill here. 

Mr. PITTS. The chair thanks the gentleman; and the chair recognizes the gentleman from Pennsylvania, Dr. Murphy, for 56 minutes for questions. 

Mr. MURPHY. Thank you very much. 

Mr. Larsen, at the end of your testimony—I couldn’t find your 

written testimony—you made reference to that if a person has to 

go back to another state because they are having problems with 

their insurance company, you said, basically, it was likely their 

consumer complaints or problems would go unresponded to or 

unheeded. Can you explain that? 

Mr. LARSEN. I think the issue is, if there is—I think the terminology that this uses is the primary and secondary state. If you are 

a resident of the secondary state, now you are essentially beholden 

to the resources of the insurance department in the primary state. 

Mr. MURPHY. But how did you word that, though? If you were 

not from that state you felt they weren’t going to be responsive? 

Mr. LARSEN. It is a resource issue, frankly. If you have got a 

company that is selling in 50 states from one primary state and 

that primary state has to address the concerns or complaints, 

which you always get as an insurance commissioner—— 

Mr. MURPHY. So you feel they would be less likely to be responsive? 

Mr. LARSEN. It is a resource issue. There are only so many people—— 

Mr. MURPHY. OK. Have you ever been to a restaurant where you 

got bad service or bad food? 

Mr. LARSEN. Yes, I have. 

Mr. MURPHY. Do you go back? 

Mr. LARSEN. I try not to. 

Mr. MURPHY. Do you tell your friends not to go back? 

The answer is that I think if a person goes to a restaurant with 

bad service, they are about 12 times more likely to tell friends 

about it, but they go to a good restaurant, they tell a few. But the 

point is, word gets out; and that ruins that restaurant’s reputation. 

Let me ask this: Does Medicare run things well? Because I know 

I have got staff that are always dealing with Medicare and Medicaid problems. As a matter of fact, I have introduced a bill to deal 

with some of things that CMS has promised. Yet when plaintiffs’ 

attorneys and trial attorneys are trying to seek information, just 

information, from Medicare with regard to how much Medicare has 

paid on a bill, it can take them weeks or months to find this out, 

and oftentimes this is an error. 

Now, my problem is seniors who have this issue, they have nowhere else to go. They have no other restaurant they can turn to. 

They have no other car dealer they can turn to. They are in a single market here where they have nowhere else to go. 

So, along those lines, one of the things I hope you will look into, 

when an organization has a monopoly on something, there is no 

competition or anything else that anybody can do, and that is part 

of what we are seeking here, is to find another way of that. So if 

a person doesn’t like the service from one insurance company, they 

say I am not going to go back, and that information does get out. 

74 

So I would ask the other panelists along those lines, what mechanisms does someone see in this bill or something that should be 

added to it that, if a person is shopping across state lines, that 

should be available for people to have information as to whether 

or not an insurance company covers certain things or they are in 

effect inefficient. 

Can someone answer that for me? 

Mr. FINAN. I would like it address that. 

First of all, health insurance is not like a restaurant. I totally 

agree with you. You get lousy service, you don’t go back. That is 

the end of that. 

But what about the cancer patient who is in the middle of a 

treatment, is being denied coverage they think they are entitled to 

under the contract? What is the recourse? They can’t go to another 

health insurance plan at that point. That is impossible. 

Mr. MURPHY. That is a good point. But that is a different—I understand the point. Look, I don’t want anybody to be denied coverage. I don’t want anybody cut from coverage. That is another 

issue. And I do want to ask you a question about cancer. 

But my point is, however, I know in the Pittsburgh market, we 

are basically locked into two companies who cover the dominant 

part of the market and a couple other ones. But people don’t have 

any other choice. So even if they say I didn’t get good service from 

this insurance carrier and didn’t get that one, they have got nowhere else to go. 

Ms. Herrera, can you answer that? Is there any mechanism you 

see that states can help demand or provide along these lines? 

Ms. HERRERA. Well, my expertise is in the area of state legislation; and in all of the states that have enacted this legislation, the 

primary state’s insurance commissioner, the primary state’s courts, 

would adjudicate those views. 

Mr. MURPHY. Well, then let me go back to this cancer question. 

Because, Mr. Finan, this is very important for cancer. Because I 

strongly support your concerns here. But do you see anything in 

this bill that prevents us from either—maybe it should be added 

to this bill, maybe another bill—that would deal with the issue of 

denial of coverage or denial of pre-existing conditions or cutting 

someone? Do you think that is something we still need to make 

sure that we address as Congress, to make sure you still can’t deny 

coverage? 

Mr. FINAN. Yes. The Affordable Care Act, one of the big advances 

from a cancer patient and survivor perspective is that there is establishment of clear consumer rights, including, for example, the 

right to appeal and the clarification. This bill, as I understand it, 

would repeal all of those provisions. So, therefore, you go back to 

the old system where there are—— 

Mr. MURPHY. It would repeal every single provision? 

Mr. FINAN. As I understand it, it would repeal title I of the Affordable Care Act, which embeds all of those consumer rights. So, 

therefore, you go back to a system where the consumer is totally 

confused. We have seen this very often among cancer patients, that 

they are denied coverage, they don’t know how to appeal, the rules 

are convoluted. 

75 

Mr. MURPHY. Well, there is something in here on page 22 about 

the right to an external appeal process, so maybe we should discuss 

that more and review that, because I would like to find out. Thank 

you. 

I yield back. 

Mr. PITTS. The chair thanks the gentleman and recognizes the 

gentlewoman from California, Mrs. Capps, for 5 minutes for questions. 

Mrs. CAPPS. Thank you. And I appreciate the previous 5 minutes. 

I don’t want to keep you on the hot seat, Mr. Finan, but I would 

like to continue this conversation about chronic diseases. 

When most people think about individuals who can’t get health 

insurance coverage because they are sick, they do think about individuals with catastrophic illnesses like cancer or AIDS or multiple 

sclerosis or any number of debilitating progressive conditions. I will 

give you a little more time to amplify it for us, some of the difficulties you have documented in cancer patients getting insurance and 

accessing treatment once they have insurance and the challenges 

that would be posed by this bill, as you understand it. 

Mr. FINAN. What I stated in my statement and are absolutely essential are the common rules. There needs to be guaranteed issues, 

that insurers are not discriminating. That helps level the risk and 

level the cost. 

Insurance is about cost sharing. It is about sharing risk. I mean, 

I have had homeowner’s insurance for 30 years and have never collected, but I am perfectly fine with that. 

In health insurance, we know that sooner or later most of us will 

experience a serious claim, and so we have to set the rules so that 

cost is spread. It is essential to have essential benefits. Because, 

too often, and we see this increasingly often, where patients don’t— 

get in the middle of treatment and then they realize they have run 

out of benefits. 

Mrs. CAPPS. Right. 

Let me just ask you, because we are faced with two choices. We 

have the law now that the approach, as you understand it under 

the Affordable Care Act, but now the Health Care Choice Act, how 

would you contrast ramifications for people with cancer? Do you believe that the protections on access to coverage would be eroded 

under this bill that is before us? 

Mr. FINAN. Oh, very quickly. No question. 

Mrs. CAPPS. Just highlight a couple of the areas, if you would. 

Mr. FINAN. Well, again, it is a race to the bottom. Insurers are 

going to sell weak benefit plans at a relatively low cost to relatively 

healthy people. 

Mrs. CAPPS. And if you become sick—because a healthy person 

can have a diagnosis with cancer, and then life changes in an instant before their eyes. 

Mr. FINAN. And that is correct. And then, all too often, insurers 

engage in practices to force people out. There have been rescissions. 

This committee has done a lot of excellent work in that area. And 

where do they go? Then they wind up in pools that are extraordinarily expensive. 

I know of an example of a few years ago of a woman who moved 

from Alabama with insurance, wanted to move to Virginia, which 

76 

is an insurer of last resort, which means the Blue Cross there does 

have to provide insurance, but they can rate based on the risk. And 

a woman with breast cancer that had completed her treatment was 

given a premium of over $60,000 a year. If you inflated that to current costs, it is probably more than $75,000 to $85,000 a year. That 

is what will happen to cancer patients under this kind of system 

where you bifurcate the risk pools. 

Ms. KAPTUR. And cherry-pick—— 

Mr. FINAN. Cherry-pick. They will get great prices. But people 

with chronic conditions like cancer are going to wind up with extraordinarily expensive insurance. 

Mrs. CAPPS. And, like you say, the reason we have health insurance is to protect us if something catastrophic happens. 

Mr. FINAN. When you become ill. 

Mrs. CAPPS. Yes. 

Mr. Larsen, I want to use the rest of the time to talk about the 

difference between— well, talk about what states’ rights involve. 

You highlight in your testimony that this bill would create an 

unlevel playing field where some of your constituents are protected 

by the laws in their states and some are not. 

In addition, you note that this bill would undercut the authorities of state governors, state legislators, and insurance regulators. 

So states’ rights are out the window, something that most of our 

colleagues on the other side of the aisle often point to as the reason 

to block-grant Medicaid or to repeal the Affordable Care Act. 

What would this do to consumers? How would it ultimately hurt 

them, if it would? 

Mr. LARSEN. Well, I think it would. And it is a huge change. I 

mean, compare the resources that different insurance departments 

have. I think the state of Texas has 20 times the staff as a state 

like Idaho. So if, for example, an insurer decided to use as its primary state a lightly regulated state with very little staff, it is hard 

to imagine how that staff could handle essentially regulating products that might be sold in 50 states. 

Mrs. CAPPS. How would you imagine a state insurance commissioner—that is something you know something about. How would 

that state insurance commissioner punish abusive insurance companies that may be located in another state? 

Mr. LARSEN. Again, if you don’t have the authority over the company that is selling to your residents, you—— 

Mrs. CAPPS. You have no control. 

Mr. LARSEN. Certainly you can, you know, talk to the other insurance commissioner, but, at the end of the day, if they are selling 

products legally under a proposal like this in your state and they 

have only so many resources and so many laws—because it is not 

just the resources. It is the consumer protection provisions. 

Mrs. CAPPS. And wouldn’t most of the insurance companies want 

to locate in a state that had very few regulations? 

Mr. LARSEN. Well, I mean, I think that is the purpose, to sell 

your policies out of a lightly regulated state, both from a resource 

standpoint and certainly from a benefit requirement. You going to 

be selling, you know, thin, light policies in my state. My healthy 

young people will gravitate to these policies, and it will essentially 

destroy the risk pool in my state, and I can’t do anything about it. 

77 

Mrs. CAPPS. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentlelady and recognizes the 

gentlelady from Tennessee, Mrs. Blackburn, for 5 minutes for questions. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

I appreciate so much you all are here to talk about this issue. 

This is one we have talked about for a good period of time. At the 

core of it is how do you increase access to affordable health care 

insurance and affordable health care delivery for all of our citizens. 

Now, you know, there are a couple of ways that we can go about 

this, but I find it very interesting that there are some in this room 

who seem to believe that individuals can’t make their own decisions about health insurance, that it is going to take the Federal 

Government, and I find that very sad. I think that most people find 

a product that works for them, and they are knowledgeable consumers, and they want to go out and buy the best that they can 

afford. We see it in other sectors of the free market system. 

Mr. Finan, did you read the bill? 

Mr. FINAN. Yes. 

Mrs. BLACKBURN. You read the bill. 

Mr. FINAN. Yes. 

Mrs. BLACKBURN. OK. You know, I would encourage you to go 

back and read the portion—and Mr. Parente actually spoke to this. 

You not only have your primary state but your secondary state insurance. 

Mr. Parente, would you like to elaborate on that point, when it 

comes to consumer protection? 

Mr. PARENTE. You have both states having your back, basically, 

which is better than just having one state. 

And, yes, you have the issue of essentially whether the state insurance commissioner does have the resources to be able to do this. 

But understand that if insurers start to migrate to that state and 

that insurer pays taxes because they are migrating to that state 

based on their revenue, guess what the insurance commissioner office is going to do? Staff up. 

You are going to set up a competition amongst the states on who 

wants to actually have the insurance companies operating within 

their parameters. And to the restaurant comment, do a good job. 

So the issue of cancer and chronic conditions, one thing I would 

like to point out that is in this study that we looked at that was 

discussed in the previous committee hearings, if you have a chronic 

condition and you have cancer, you are better off under an interstate provision than the status quo. And the status quo will take 

us to 56 million uninsured by 2014. 

This law that is being discussed or things like that addresses 

those people with cancer and chronic conditions today, not in 2014. 

How can you say to somebody 3 years from now it is oK for you 

to die because you can’t have insurance coverage because we have 

to wait for the law to come into power? 

Mrs. BLACKBURN. OK, Ms. Herrera, let’s talk about state insurance commissioners and legislatures. Do you find that they evaluate the cost of the mandates before they implement them or do 

they put them in place and then do a review? 

78 

Ms. HERRERA. In about 28 states, they have what is called a 

Mandated Benefits Review Act, which requires a cost-benefit analysis for proposed state mandates before they take effect. 

Mrs. BLACKBURN. OK. As a practical matter—and, Mr. Howard, 

let me come to you on this. Because I think that some of the research work you all at Manhattan Institute have done—as a practical matter, insurers have to offer policies that consumers are willing to purchase. We know that. And I believe consumers are pretty 

savvy. Shouldn’t they be able to determine which type of benefits 

that they want, that insurers are willing to buy, that they can go 

to one of the states which has offered a certain set of mandates, 

a certain set of benefits, and then make those choices, knowing 

that they are going to have that benefit review in that state, find 

a product that fits them, and then be able to move that into the 

marketplace? So shouldn’t they have the ability to make that decision? 

Mr. HOWARD. Absolutely. And I think that what we need to think 

of this is as a dynamic system. So no state is going to want to have 

the reputation of being a fly-by-night state where they were allowing terrible or abusive insurance practices. They in effect would 

want to become the Delaware of insurance, where they would want 

to have the reputation for the best solvency requirements, the best 

consumer protection, and the most affordable policies. So states 

would have powerful incentives to attract consumers, as Dr. 

Parente just pointed out, for reasons of accruing premium taxes, to 

have the right mix of coverage that was both affordable and—— 

Mrs. BLACKBURN. Thank you for that. 

I have got another question. Mr. Larsen, your testimony praises 

PPACA for supposedly aiding children with pre-existing conditions. 

Yet what we have seen in some surveys since PPACA was signed 

into law is that the carriers are no longer offering child-only health 

policies in 20 states. The so-called protection for children with preexisting conditions has turned into a nightmare, an absolute nightmare, where many parents cannot find coverage for their children 

at all. Do you believe that that is an acceptable outcome? 

Mr. LARSEN. Here is what I would say. We have—— 

Mrs. BLACKBURN. Yes or no? 

Mr. LARSEN. We have stopped the process. We tried to stop the 

process of insurance companies not providing coverage to sick kids, 

which they actually agreed to do and then decided that they didn’t 

want to do. And we have given them every tool possible in terms 

of open enrollment, rating options, everything. And I think—— 

Mrs. BLACKBURN. Do you find it acceptable that premiums have 

increased on young adults 17 percent? AP reported that young 

adult health premiums have increased 17 percent because of the 

new law. Do you find that acceptable? 

Mr. LARSEN. Those certainly aren’t the numbers that we have 

seen, and I am not familiar with that. 

Mrs. BLACKBURN. I will be happy to supply you with the article. 

I yield back. 

Mr. PITTS. The chair thanks the gentlelady and recognizes the 

ranking member of the full committee, Mr. Waxman, for 5 minutes 

for questions. 

Mr. WAXMAN. Thank you, Mr. Chairman. 

79 

I find this bill like a bad penny—it keeps on coming back. And 

it doesn’t make sense now, particularly since we have the Affordable Care Act. The Affordable Care Act was supposed to deal with 

the problem of people who have pre-existing—one of the big problems. People can’t buy insurance, and they can’t buy insurance in 

the individual market often because they have pre-existing conditions. 

Dr. Howard, would this change the practice for pre-existing conditions if an insurance company still wanted to discriminate? 

Mr. HOWARD. You know, in states that have implemented both 

community rating guaranteed issue—— 

Mr. WAXMAN. I am just asking you, is there anything in this bill 

that would prevent denying coverage because of pre-existing conditions? 

Mr. HOWARD. It would allow people to buy insurance that was 

more affordable. It would give people more options to buy insurance. 

Mr. WAXMAN. Well, what if the insurance companies didn’t want 

to cover them because they had pre-existing conditions? 

Mr. HOWARD. Insurance companies that didn’t offer coverage or 

offered unaffordable coverage should have the option of state highrisk pools, federally funded, hopefully, to have that option. 

Mr. WAXMAN. That is not in this bill. That is not existing law. 

Now, let me go through, rather than the abstract of some of 

these issues, let me get into some details. 

Dr. Howard, do you believe that insurance companies should 

cover the adopted children of their policyholders? 

Mr. HOWARD. If they would like to pay for that additional coverage. If people want to pay for additional coverage, it shouldn’t be 

mandated that everybody has to cover that, which just passes costs 

along to other consumers. 

Mr. WAXMAN. You don’t think it is appropriate for states to require coverage of adopted children the same as their other naturalborn children? In fact, I can’t imagine how anybody could justify 

an insurer not covering adopted children in the same way they 

cover other children. The Blackburn bill would end that protection 

that has been adopted by 45 states. 

Dr. Howard, do you believe that insurance companies should be 

required to cover disabled dependents, such as disabled adult children living with their parents? 

Mr. HOWARD. I believe that states that have those requirements—the problem is that insurers will offer any benefit to consumers—— 

Mr. WAXMAN. You could buy anything if you have the money, but 

there would be no requirement that the insurance companies cover 

disabled adult children. Disabled adult children, often unable to 

work, would have nowhere to turn for their health care unless they 

could be covered under their parents’ policy. Nowhere, of course, 

except Medicaid, which the Republicans are proposing to destroy. 

The Blackburn bill would eliminate this protection that 42 states 

have chosen to cover. 

What about coverage for well child care? 

Mr. HOWARD. states in this market—if we move to an interstate 

insurance market, individual states will decide what the best mix 

80 

of coverage is. So for things such as disabled children or covering 

adopted children, a state would say that is a valuable policy. We 

are going to keep that. 

Mr. WAXMAN. Can they mandate it? They can’t require it. A policy approved in Iowa must be sold in the state of Nebraska, isn’t 

that right? And if that policy doesn’t cover it and other policies decide they have to compete with this cheaper policy and they stop 

offering coverage, the state has no ability to mandate, is that right? 

Mr. HOWARD. That is correct. But they have—— 

Mr. WAXMAN. OK. Now what about this coverage for well child 

care? This is now guaranteed by 34 states that help healthy babies 

stay healthy. And that would be eliminated. Thirty-four states have 

required it, and this would be eliminated. 

Do you believe insurers should cover diabetic testing supplies to 

make sure that diabetics can manage their diabetes? 

Mr. HOWARD. Congressman, I believe what would happen is that 

insurers would look at individual mandates on a case-by-case basis 

and say does this add value to the policy and help keep our individual policyholders healthy? In many cases, they may keep some 

of those mandates. They are likely to get rid of mandates that don’t 

have the right cost-benefit balance. 

Mr. WAXMAN. Excuse me, the insurance companies will decide if 

they want to cover that, and they won’t be told they have to, only 

if they think it is something they think is part of the package they 

want to offer. 

Mr. HOWARD. That gets consumers to buy their policies. 

Mr. WAXMAN. Yes. But if consumers don’t have a choice of any 

policy that covers it, then they just have to buy whatever is available. This particular requirement on diabetic testing supplies has 

been guaranteed by 47 states, and that would be eliminated by the 

Blackburn bill in those states. 

I could keep going. Emergency care is required in 47 states; alcoholism-substance abuse treatment, 45 states. Maybe an insurance 

company would decide that is too much, and they don’t want to 

provide that. Colon-rectal cancer screening, out of the munificence 

of an insurance company, they may decide that keeps people from 

getting colon cancer, but it is cheaper to sell a policy that doesn’t 

cover that. Cervical cancer screening. And we can go on and on. 

I must say, Mr. Chairman, that I find it amazing when people 

quote the wisdom of Dennis Hastert to say you don’t force them to 

buy a Cadillac. If we don’t allow people with pre-existing conditions 

to buy anything because there is nothing available to them, they 

won’t even be able to buy a jalopy. And I am always amazed when 

I hear people say we are going to give people the freedom, give 

them the freedom to buy something that won’t be available to them 

because they can’t afford it or it is just not even offered. 

So I yield back my time. 

Mr. PITTS. Thank you, Mr. Waxman. 

I yield to the gentleman from Georgia, Dr. Gingrey, for 5 minutes. 

Dr. GINGREY. Mr. Chairman, thank you very much. 

I am going to turn to Mr. Larsen. 

81 

Mr. Larsen, would you explain to us again what your position is 

within the Center for Medicare and Medicaid Services, what your 

title and responsibilities are? 

Mr. LARSEN. Sure. I am the director of the Center for Consumer 

Information and Insurance Oversight, and this Center focuses 

strictly on the private-market health insurance reforms with the 

Affordable Care Act. So exchanges, implementation of the MLR 

provisions, rate review. We do not handle—a different Center handles Medicaid and a different Center within CMS handles Medicare. 

Dr. GINGREY. Right. 

Mr. LARSEN. We are strictly the private market. 

Dr. GINGREY. Thank you for clarifying that. 

In your testimony, you state that because of the Affordable Care 

Act, sometimes referred to as ObamaCare, that most insurance 

companies cannot discriminate against someone because of pre-existing conditions; and you go on to state that ‘‘we have also prohibited insurance company rescissions, so most insurers can no longer 

cancel coverage when individuals get sick just because they may 

have made a mistake in filling out the application and doing the 

paperwork.’’ 

In all, you use the phrase ‘‘most’’—the word ‘‘most’’—eight times 

in your testimony when referring to insurance plans or companies. 

I am curious, Mr. Larsen, which insurance plans do not fall under 

the protections you praise for the Affordable Care Act? You say 

most, not all. 

Mr. LARSEN. I will go back and look. 

The nutshell version is, for example, rescissions, which is one of 

the provisions that takes effect now, that is in effect today, that applies to all insurers. And then when we get to the exchanges in 

2014, the prohibition on pre-existing conditions, exclusions, and exclusions, you know, based on health status will disappear. 

Dr. GINGREY. Well, let me interrupt you just for a second. Would 

you say then that maybe one particular plan that is not covered is 

the Medigap plan, the Medigap plan offered by AARP, which controls over 30 percent of that market? My reading of the bill suggests that they are not really covered. You don’t have jurisdiction 

over the Medigap plans that are offered by AARP, is that correct? 

Mr. LARSEN. Not in my shop, no. There is a different set of rules 

that apply to the Medigap plans and the conditions under which 

they have to be issued. So we don’t deal with the Medigap in the 

exchanges. 

Dr. GINGREY. Are the Medigap plans, for which we all know in 

previous testimony that AARP reaps a pretty significant profit, royalties they call it, are they subject to these same consumer protections that you talked about in regard to—— 

Mr. LARSEN. There is a whole different set of protections and provisions that deal with the Medigap policies. So, for example, 

Medigap isn’t part of the private-market reforms we are talking 

about. 

Dr. GINGREY. The fact is, of course, that AARP, the American Association of Retired Persons, who promotes and markets this 

Medigap policy for a particular insurance company from whom they 

receive a lot of royalties since it is 30 percent of the market, that 

82 

they were granted an exemption from a lot of this oversight and 

regulation. Who knows whether that is a political support sort of 

thing, a reward for endorsing ObamaCare. 

But help me understand something else. You are here today testifying on behalf of the administration that, without ObamaCare’s 

consumer protection, cross-state purchasing is a bad idea. Yet seniors under Medigap plans are not afforded those same protections. 

Yes or no? 

Mr. LARSEN. Well, I can’t really speak to kind of the details of 

the Medigap plan. 

Dr. GINGREY. Well, I can speak yes or no, and the answer is no. 

Do you believe that seniors under Medigap plans should enjoy 

the same consumer protection as younger Americans? 

Mr. LARSEN. As which Americans? 

Dr. GINGREY. Younger. 

Mr. LARSEN. I think anybody in a Medigap plan should have the 

right to consumer protections, and what those are compared to 

what other policies are I can’t get into. 

Dr. GINGREY. Can you explain to me why seniors were not given 

the same consumer protection under the Affordable Care Act as 

younger Americans? 

Mr. LARSEN. Again, it is a different regime, the Medigap or supplemental policies to Medicare, as opposed to policies issued in the 

commercial market. 

Dr. GINGREY. But wouldn’t you agree that they deserve the same 

consumer protections as any other Americans? 

Mr. LARSEN. They may, and they may get them. I don’t know. 

Dr. GINGREY. Mr. Larsen, the Obama administration and the 

congressional Democrats cut over $500 billion out of Medicare to 

help finance ObamaCare. And ObamaCare is not Medicare. It is a 

new entitlement program, maybe an entitlement program for 

younger people. They didn’t provide consumer protection for seniors 

that were afforded to every other American. 

It is hard to ignore the fact that this administration purposely, 

purposely, raided Medicare to fund a political takeover of health 

care and quite simply ignored the needs of seniors in the process. 

And now the solution they say is iPad. If you think the first rate 

was bad, what until you see the second. 

I yield back. 

Mr. PITTS. The chair thanks the gentleman and yields 5 minutes 

to the gentlelady from Illinois, Ms. Schakowsky, for questions. 

Ms. SCHAKOWSKY. Well, that is interesting, that the gentleman 

is criticizing the Democrats on Medicare, when he and all but four 

other Republicans voted for a plan that essentially ends Medicare. 

It could have a different name, but it won’t be Medicare-guaranteed benefits for the elderly. 

I wanted to clarify something else, and that is the Affordable 

Care Act, as I understand it, does include a provision to allow insurers to sell insurance across state lines and only be subject to 

laws in the issuing states, but that there is also a provision known 

as the health care choice compact that includes a number of protections for states and for consumers. So insurance companies can sell 

across state lines under the Affordable Care Act, am I right? 

83 

Mr. LARSEN. There is a mechanism to do that. The only difference is it doesn’t result in the preemption of either state’s laws. 

Ms. SCHAKOWSKY. Right. So the state laws that were cited by 

Ms. Herrera—I think you mentioned Georgia, Maine, Wyoming, 

maybe some others—those laws would, under the bill we are talking about today, would be preempted. They would be eliminated. 

Am I right? 

Mr. LARSEN. That is correct. 

Ms. SCHAKOWSKY. Under the Affordable Care Act, those states 

would be able to maintain their laws. 

Mr. LARSEN. Right. We get the benefit of interstate sales without 

the problems associated with one state preempting the laws of another state. 

Ms. SCHAKOWSKY. I really wanted to clarify that, because I think 

we are talking about it as if the Affordable Care Act doesn’t allow 

for states to sell policies. We just do it with the interest of consumers in mind. 

Mr. Finan, you seem anxious to respond to comments or questions that were raised by my colleague from Illinois, and I wanted 

to let you do that. But I wanted also to clarify something else. 

Mr. Parente said—and it is true that some of the protections of 

the Affordable Care Act don’t go in place for 3 years. So, you know, 

he is saying that, right now, cancer patients can just die or something. But does this bill really protect cancer patients? So if you 

could say what you wanted to say and then also—— 

Mr. FINAN. I just wanted to go back to the gentleman from Illinois, who has left, but he said cancer patients should be most concerned about uninsured. We are obviously very concerned about 

that. But the problem of under-insurance is an extremely important one, too. And we do see this, and it is becoming nefarious, 

where patients are in the middle of treatment, realize their benefits have run out, that they simply can’t go to the doctor anymore, 

they can’t get more treatment because it is not covered. 

Ms. SCHAKOWSKY. So it is not like they can pick another restaurant. 

Mr. FINAN. No. Exactly. That is exactly the point. 

I am sorry, what was your second question? 

Ms. SCHAKOWSKY. The second question was that, while it is true, 

and for some people I am sure troubling, that the Affordable Care 

Act’s full provisions don’t come in for another 3 years, do the provisions under this bill provide the kind of protection that you need? 

Mr. FINAN. Well, first of all, some of the provisions of the Affordable Care Act have kicked in. We do have extensions of dependent 

coverage. There is no ban on lifetime limits now. There are raising 

of the annual limits. So some of the benefits have kicked in. There 

is a transition. 

But the point is, if we didn’t have the Affordable Care Act act, 

we would be in a worse place. We would go back to the pre-Affordable Care Act where none of those provisions are in place. So the 

Affordable Care Act is moving—— 

Ms. SCHAKOWSKY. But would this bill—— 

Mr. FINAN. No, as I understand the bill, it would essentially go 

back to the world of protections we had before the Affordable Care 

Act; and, in fact, it would exacerbate it for all of the reasons I said. 

84 

You wind up with a race to the bottom and you wind up with cherry-picking, which makes things—ultimately, we would wind up 

with a worse situation than we had before. 

Ms. SCHAKOWSKY. Let me just finish with this. As a former state 

legislator, we worked very hard on both sides of the aisle to put 

in the consumer protections that are in our state legislation that 

range from mammograms to all kinds of things that we thought 

should be available in our state. And that is true, and Mr. Waxman 

enumerated many that are so popular that 40–45 states have 

those. Those, as I understand it, Mr. Larsen, would all be eliminated if there were something from out of state. 

Mr. LARSEN. Sure. If an insurer picked as its primary state a 

state that didn’t have those benefits, and there are a small number 

that don’t, then, yes, that would set the standard or the ceiling for 

all other states in which those policies were sold and you would not 

get the benefit of those. 

Ms. SCHAKOWSKY. Thank you. 

I yield back. 

Mr. PITTS. The chair thanks the gentlelady and recognizes the 

gentleman from Louisiana, Dr. Cassidy, for 5 minutes for question. 

Dr. CASSIDY. Folks, I have 5 minutes. If I interrupt you, I am not 

being rude, I am just trying to maximize. 

Dr. Howard, Mr. Pallone spoke glowingly of how New Jersey regulates, protects consumers, et cetera, et cetera, and they don’t want 

a race to the bottom. What I see, though, from your excellent testimony, Ms. Herrera, is that the premiums for somebody with an individual policy in New Jersey are about 40 percent higher than in 

Pennsylvania. New York, which also has banned community rating, 

I suppose, and guaranteed issue, it is more than double. 

What is going to be the impacts upon insurance? What is the 

data? Everybody is talking about how they feel. I want data. What 

are the data about doubling of premium and what that does to your 

rate of uninsured? 

Mr. HOWARD. I defer to Dr. Parente on the exact numbers. 

Mr. PARENTE. I mean, basically, if you have premiums that are, 

you know, substantially less, obviously more people are going to get 

coverage. That is the best way to deal with it. 

Dr. CASSIDY. If you lower premiums by 50 percent, that would 

have a significant impact on the ability of people to get good coverage, correct? 

Mr. PARENTE. Yes. 

Dr. CASSIDY. And data shows that? 

Mr. PARENTE. Yes. That is what the study shows. That is what 

we are trying to say. 

Dr. CASSIDY. Mr. Finan, we actually have empiric data. We know 

that ERISA plans have few mandates. No cancer mandates that I 

know of. And yet we know that they, if you will, can be compared 

to plans which have lots of mandates, including some ERISA plans 

governed by state insurance companies. 

Is there any difference that you know of, data, not feelings, but 

data that you know of, in difference in cancer outcomes between 

those covered by ERISA plans without mandates and those covered 

by plans subject to mandates? 

Mr. FINAN. I do not know of any specific data, no. 

85 

Dr. CASSIDY. I didn’t think so. So, in fact, much of what you are 

saying is kind of an existential anxiety. I am not sure you actually 

have data to show that the mandates improve. Just comparing 

ERISA to non-ERISA, no mandates to mandates, I am not sure you 

have that data. 

Mr. FINAN. But the problem is—— 

Dr. CASSIDY. No, no, no, no, I am sorry. I am really into data 

right now. 

Dr. Parente or Dr. Howard—I am checking for your Ph.D.s, I am 

sorry—Mr. Larsen suggests that the community rating keeps the 

young and healthy in the market. He kind of painted a catastrophic, oh my gosh, if we don’t keep them in market, terrible 

things happen. 

Can you elaborate—maybe it was you, Dr. Howard—what happened in New York state to the rates of uninsured among the 

young when they put in community rating? 

Mr. HOWARD. The market collapsed. 

Dr. CASSIDY. I am sorry. What did the market do? 

Mr. HOWARD. The market collapsed. 

Dr. CASSIDY. And that is not an existential anxiety. That is data, 

correct? 

Mr. HOWARD. That is correct. 

Dr. CASSIDY. Do you want to elaborate a little bit more? 

Mr. HOWARD. Yes. As recently as 2000, I believe, there were over 

128,000, 130,000 people in New York’s individual direct pay market. Today, there are fewer than 30,000 in that market. And people 

have recognized because costs have skyrocketed and young and 

healthy people have had to drop out of the market. 

Dr. CASSIDY. So it went to this highly regulated market that 

theoretically is going to provide protections for people. You say the 

market collapsed. 

Mr. HOWARD. Theoretically, it is supposed to get people to stay 

in the market, but because young people are very cost sensitive, 

they drop out. 

Dr. CASSIDY. OK, got you. 

And obviously one thing that was a problem that PPACA had to 

address was the problem of the disproportionate rate of the lack of 

insurance among the young. If you will, we created the problem 

that we then had to cure. 

Dr. Parente, in your data, in your paper, you suggest that Alabama would be really at a competitive advantage because they 

have few mandates. 

Mr. PARENTE. That is correct. 

Dr. CASSIDY. I was thinking, Mr. Finan is discussing a woman 

that moved from Alabama to Virginia, had to drop her policy apparently because she was no longer allowed to purchase that from 

Alabama and so was faced with a large increase. But in your paper 

you would suppose that Alabama would begin to sell. If you will, 

she would have been able to keep her policy. The more robust we 

have interstate commerce, the more likely someone could continue 

to keep their policy upon which they were, correct? 

Mr. PARENTE. That is correct. 

Dr. CASSIDY. OK. That is pretty interesting. 

86 

Now, Mr. Finan, I just see you biting your lip. I know you want 

to respond to me. What would you say, man? And I only have 59 

seconds, so I may cut you off to respond to you. 

Mr. FINAN. Going back to your ERISA issue, you are talking apples and oranges. For the most part, large employers, whether they 

be self-insured or have commercial insurance, do a very good job 

or a relatively good job of covering serious conditions because they 

can spread the risk. They have a large number—— 

Dr. CASSIDY. If we have somebody who is interstate, interstate, 

we actually have the ability to share risk. Some of the concerns you 

and Mr. Larsen have actually don’t pertain to this bill. We could 

easily have an anti-rescission bill in here. We could easily have 

other things that you are postulating would be a problem. 

Mr. FINAN. But the fundamental difference is in the individual 

market you are selling to individuals. You are not selling to large 

groups. When you sell a plan to a large group of 5,000 or 

10,000—— 

Dr. CASSIDY. We could have a guaranteed renewability. I mean, 

that could be added. 

Mr. FINAN. But you are not going to sell in the first instance. If 

you are an insurance company, you are looking at the individual 

and his or her risk at the point of enrollment. If that person has 

cancer or a history of cancer, you are—you the insurance company—are going to deny coverage. 

Dr. CASSIDY. If you look at the experience in Holland, if you look 

at the experience in Holland, there are actually companies that 

specialize in people that are high risk. 

Mr. FINAN. I am sorry, which company? 

Dr. CASSIDY. In Holland. If you actually look at the experience 

in Holland, there are actually companies that make a living specializing in those who at higher risk. The market will respond. 

I yield back. I am out of time. 

Mr. PITTS. The chair thanks the gentleman and recognizes the 

gentleman from Texas, Mr. Green, for 5 minutes. 

I am sorry, I am out of order. Mr. Guthrie for 5 minutes. 

Mr. GUTHRIE. Thank you, Mr. Chairman. I appreciate it very 

much. 

To Mr. Larsen and Mr. Finan, the concern, the major concern— 

there are several concerns you voiced—but the major concern you 

voiced is that if a state with low mandates came into Kentucky— 

Kentucky has 34 mandates, I believe—and offered health insurance, and the young, healthy would purchase that health insurance, and, therefore, as a matter of fact—to quote Mr. Larsen—destroy the risk pool. And that is your major concern. So it is acknowledging that people are sharing costs as you went forward. 

You also mentioned, Mr. Finan, that you had homeowners insurance, which I have as well, and you paid 30 years on it, and I paid 

for quite awhile, because we have the risk of something happening. 

I want to be covered for a calamity. 

However, if I could purchase homeowner’s insurance when my 

house is on fire or when it was burning or when a tornado was 

coming, you wouldn’t have paid for it for 30 years if you could have 

bought it when you needed it. 

Mr. FINAN. Absolutely. 

87 

Mr. GUTHRIE. So when Mr. Larsen talks about the market working with the exchanges, I think you are going to have the exact 

same problem you are talking about here with the Health Care Act. 

If you are 27 years old and healthy and you are going to have a 

list of mandates that your guys are going to subscribe, because you 

are going to have essential health benefits, if you call them that, 

and you are going to have to pretty much match the most expensive state. Because if you don’t, all of the lists that—Ranking Member Waxman listed all of those. If a state goes beyond what you 

offer, the state has to pay for it. They have to actually subsidize 

those coverages. So either you are going to sit here and listen to 

a list that he is going to read off about you not covering, you are 

going to cover everything. 

So my point is, I don’t see how you can get around the premiums 

are going to increase for anybody because of the Health Care Act. 

It has to. Therefore, if you are young and healthy and you get 

guaranteed issue and you get community rating—and we have seen 

it New York. We have examples of it happening, talking about 

data. What is going to happen to the young and healthy? They are 

going to drop out of the market. 

Now you have the mandate to buy, but if my math is correct, I think it is a $600 fine plus 1 percent of your salary. So if you are 

a 27-year-old engineer making $50,000 a year and are healthy, you 

can pay an $1,100 fine—and the most expensive state I think is 

Massachusetts. It is $14,000 a year, health insurance. And let’s 

even factor that back down to $10,000. So I can pay an $1,100 fine 

or $10,000 health insurance policy. 

And if I need health insurance—as a matter of fact, I think you 

can tell your anesthesiologist just before he puts you out to let you 

make one last phone call to your health insurance company to buy 

health insurance. But I think that would actually be allowed in the 

law. 

And I don’t see how this whole argument about this bill destroying the risk pool, how does the Health Care Act not destroy the 

risk pool under that scenario? 

Mr. LARSEN. Well, you are still going to have coverage options 

with the various levels within the exchanges for individuals. You 

are going to expand the risk pool, which is a good thing. The problem with these proposals is the risk segmentation that we get into. 

Mr. GUTHRIE. Well, why would a young, healthy person purchase 

health insurance with guaranteed issue? In New York, you have 

seen it. You have seen it. Why would a young, healthy person 

under PPACA purchase health insurance when the fine is $1,100? 

Mr. LARSEN. People are going to have the opportunity to get comprehensive, affordable care in the exchanges. Even the CBO estimates that the exchanges are going to reduce administrative costs 

for insurers because they are not going to have to spend the time 

and the money and the resources underwriting people and setting 

up rating rules to exclude sick people. So it is going to be an attractive option. 

Mr. GUTHRIE. But if the premium is not somewhere close to the fine, or $1,100 a year under my scenario of $50,000 a year for a 

27-year-old, if the premium is not somewhere close to that and you 

can get it when you need it, why would you buy it? 

88 

Mr. LARSEN. I think people want comprehensive health care. 

Mr. GUTHRIE. But they can get it if they need it, as opposed to paying $10,000 a year. I mean, why would somebody under that 

scenario laid out in health care buy health insurance if they are 

a young person? I mean, that is the major problem with the law. 

The guaranteed issue, the mandate to buy is covered by if you don’t 

buy it, you have to pay a fine. 

But I don’t understand—if the market is going to work as you 

have seen in New York—I don’t know if New York has a fine, but 

people can drop out of the market and pay the fine. I don’t understand why you are not going to have the same problem under the 

Health Care Act on a national scale that you are talking about having by letting people having mandate-like benefits to purchase. 

Why that is not going to happen. I mean, I just don’t see how that 

is not going to happen. 

Mr. LARSEN. I think you are going to see people that want to get 

comprehensive coverage through the exchanges. 

Mr. GUTHRIE. But I believe they can buy it—but the guaranteed 

issue, why would they do it? That is my point. Why would a 

healthy person, young, do it? 

Mr. LARSEN. There is a lot of people that can’t get their coverage 

today. I mean, that is the issue that we are dealing with today, 

which is the broken market. 

Mr. GUTHRIE. But it is still going to have a different risk pool. 

Because if you are young and healthy and drop out, then it is going 

to be more expensive; and, therefore, more young and health will 

drop out and it will become more expensive. 

I yield back. 

Mr. PITTS. The chair thanks the gentleman and recognizes the 

gentleman from New York, Mr. Weiner, for 5 minutes for questions. 

Mr. WEINER. Thank you, Mr. Chairman. 

I think actually this is an interesting conversation about whether 

or not you should have insurance regulated by states. I think you 

can make a pretty good argument that maybe this should be something that should be governed nationally. 

Now I would be interested in knowing whether my Republican 

friends would be interested in the repeal of the provision that essentially permits insurance companies to operate outside many of 

the antitrust laws because they share information. The argument 

always was, let them share information because it is important for 

their business model to be able to do it. 

But I actually think that most citizens when you ask them, do 

they want, if they live in Tennessee, to have Blue Cross of Utah 

covering them, there is a practical reason why that doesn’t happen, 

right? If you are Blue Cross of Utah, you have to hire a bunch— 

or get a lot of people in your program that are Tennessee doctors. 

You don’t want to go to a doctor in Utah. You are shaking your 

head no, Dr. Parente? 

Mr. PARENTE. Yes. 

Mr. WEINER. You think that patients in Tennessee would like to 

have a doctor in Utah? 

Mr. PARENTE. I am saying if they are in the ERISA plan, or more 

than likely if they are a Federal employee that is living in TenVerDate Nov 24 2008 10:38 Feb 06, 2012 Jkt 037690 PO 00000 Frm 00094 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-50 052511\112-50 CHRIS
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nessee, they are already working through United Health Care, 

GEHA, Blue Cross/Blue Shield National Association, getting a national provider—— 

Mr. WEINER. But Blue Cross of Utah—let’s assume for a moment 

I am in Tennessee, let’s say Chattanooga, and I have a doctor in 

Provost and I am sick. So it is a long flight. I think it is going to 

be a pretty long flight, so I am probably going to want a doctor in 

Tennessee. 

So Provost, the firm in Utah, is going to have to set up some 

kind of a plan for Tennessee. They have to serve some doctors, 

right? 

Mr. PARENTE. No, they are going to have a reciprocity agreement 

with the—— 

Mr. WEINER. So, frankly, you do want to have some level of state 

regulation on where people are going to be operating, but I do 

think that if you really want to have interstate—ability of people 

to buy interstate, then you definitely like what you saw in 

ObamaCare, because by establishing basic standards that allow a 

foundation that we can all kind of compare—which is the fundamental notion here—is that we should be able to compare these 

products. We should have access to them. Interstate compacts could 

be formed, maybe even someday a national compact, although I 

think that would be offensive to the sensibilities of many of my Republican friends. And, frankly, you are much closer to having this. 

But the real objective has to be it has to be something that someone in New Jersey wants from someone in Tennessee. 

And the effect of the law, if this were to become law, is that basically you are saying to a citizen, you are going to outsource your 

rulemaking and your regulatory structure to another state. Why 

even have the states? Why have the states be involved in the insurance market at all then, at that point? Why not just get them out 

of it completely and just regulate it nationally? I mean, is that the 

position of the panel? I guess it would be an intellectually consistent position to say to do that. Why do the states have to be involved here at all? 

The reason the states are historically, is because it is thought 

that you needed some consumer protection be done at a state level, 

that you be able to call your local state attorney general or your 

state insurance commissioner and say, ‘‘I’ve got a beef with this insurance company and how they are treating me.’’ 

Under this law that we are considering today, this bill that we 

are considering today, it is my understanding that what will happen is you are going to have some authority of the local guy to call 

Tennessee and say, ‘‘Hey, stop violating my citizen’s rights.’’ But 

that is really it; you are not going to really be able to march into 

Tennessee and be able to—I guess you can sue them in Tennessee 

court if you want. 

But this is another instance where my friends want to take— 

they did this last week with their tort proposal—they want to remove the state’s authority to govern this stuff, to govern their own 

citizens. It is a strange place that that they argue. They always 

talk about the needs, the rights of states. And what you are doing 

now is not only taking rights away from states and giving them to 

the Federal Government, which they did last week with the tort reVerDate Nov 24 2008 10:38 Feb 06, 2012 Jkt 037690 PO 00000 Frm 00095 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-50 052511\112-50 CHRIS
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form proposal, but now they are saying give it from one state to 

another state. I think that is truly problematic. 

But if you do believe in the idea, and I kind of in a general sense 

I believe in the idea, like having more ability of people to purchase 

products that are more advantageous to them. But I don’t believe 

that I should outsource New York’s authority to govern insurance 

to Texas or to New Jersey. 

And I think my state legislature, for all its weaknesses and 

flaws, I want to vote for them, and I want them to have the power 

to pass laws. My state insurance commissioner is appointed by my 

Governor. I don’t think that is outside the realm of what is practical. 

What it really comes down to is my Republican friends, they 

don’t have a consistent thrust on what they don’t like about health 

care reform. They just know they don’t like anything that is being 

done presently by the people who are trying to fix it, and I think 

that’s evident here today.. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Texas, Mr. Green, for 5 minutes of questions. 

Mr. GREEN. Thank you, Mr. Chairman. Thank you and the ranking member for allowing me to waive on. 

Mr. Finan, I know we were discussing Congresswoman 

Blackburn’s bill. There is an old saying that an ounce of prevention 

is worth a pound of cure. And I am concerned this proposal may 

actually raise health care costs overall as many individuals who 

need preventative care don’t get it. 

A good example: Some cancers can be treated early if detected 

early, with better results for the patient’s health and lower costs. 

Colorectal cancer is one of the examples. According to the CDC, 

nine out of every ten people whose colorectal cancer is found early 

and treated are still alive 5 years later. If everyone age 55 or over 

had regular screenings and all precancerous polyps were removed, 

as many as 60 percent of the deaths from colorectal cancer could 

be prevented. 

Could you please comment on how this legislation will worsen 

health care outcomes for individuals with cancer and raise health 

care costs overall? 

Mr. FINAN. Yes, thank you, Congressman. That is an extremely 

good and important question. The health care system today, or up 

until today, has given way too little attention to prevention and 

screening. We, the American Cancer Society and the Cancer Society Action Network, have fought vigorously to expand mandates in 

states on mammograms and colonoscopies, for example, because 

they are proven—they are cost-effective in reducing cancer. If people get screened properly and according to guidelines, they are 

much more likely to be detected at an earlier stage, and therefore 

they are likely to get better treatment. 

But as I understand the way this bill would work, interstate 

sales would not be required to cover those screenings, so we would 

be taking a huge step backward in terms of addressing chronic illness. And chronic illness is the major driver of health care costs in 

this country. 

91 

Mr. GREEN. My other question is for the whole panel. Mr. Finan, 

of the problems you mentioned is those who are uninsured and receiving a diagnosis of cancer. You also mention that even insured 

people, 25 million face major struggles paying their bills now. How 

is it that people with insurance are not able to cover their health 

care costs? And I know there are lots of different products out there 

that you can buy a $25,000 plan. And if you have cancer, $25,000 

may not even cover your first surgery. 

Can you talk about how folks who have insurance are not covered by that insurance for their treatment, particularly in cancer? 

Mr. FINAN. Well, because today there is no such thing as an essential benefits package, insurers can offer a wide variety of 

sources, and some will argue that that provides choice. But the reality that we have seen all too often is that cancer patients who 

get in the middle of treatment all of a sudden discover there are 

limits within their plans. They can only go to the doctor X number 

of times, or there is no coverage for anesthesiologists or something 

in network. 

And one of the very serious problems we have is the lack of 

transparency in insurance. Most consumers buy insurance because 

of the cost, but they don’t have any understanding of what is in the 

benefits package. They don’t know how well it will cover them if 

they get a chronic disease like cancer or heart disease. 

One of the great advantages of the Affordable Care Act is much 

more requirements to increase transparency, to force insurers to 

disclose more information, and to provide consumers with more information. 

Mr. GREEN. Well, and I understand, because up until the Affordable Care Act, typically insurance was a state product, except for 

ERISA. And I have a lot of companies who come under Federal 

laws, no essential benefits under ERISA either. And there have 

been problems in some of my large industries, but most states 

make up for that by having a mandated benefit. 

I have to admit I was in the state legislature in Texas for 20 

years, and we started out really well, because my first term we actually required insurance companies as mandated benefits that covered children from the time they were born, and not wait until they 

survived 30 days from birth before they would provide health care. 

That was great. 

But then I saw over the rest of the years, and even maybe now, 

the laundry list got so big it was almost incomprehensible. 

Now, I know Alabama has a very small list, but I would compare 

some states that had such huge mandated benefits, it is really difficult. And I would like the panel to talk about that at least in the 

last 20 seconds that I have. 

Mr. PARENTE. Just a quick comment. I am a professor of finance 

and insurance. There is technically not a term called ‘‘underinsurance’’ in theory in insurance law. It is a term that has been popularized by Karen Davis at the Commonwealth Fund to basically 

talk about the cost hardships associated with just living. And insurance is part of just living in a western industrialized society. 

The point is this law, this policy, will reduce the premium cost 

on average for all Americans, and that will enable them to buy insurance easier and faster. 

92 

Mr. GREEN. You are talking about the Affordable Care Act? 

Mr. PARENTE. No, I am talking about letting people buy insurance across state lines. Anything the Affordable Care Act is going 

to do is hypothetical and 3 years in the future, other than the provisions passed already that have provided some protections that 

are there. 

To be very clear I applaud some of the things that are in the exchanges. And my idea, the exchange is a bipartisan idea that actually has a lot of potential and is consistent with the interstate components. 

Mr. GREEN. You surprise me because typically everything bad— 

everything that is in the law is bad. Although there are a lot of 

things in there that we worked on very bipartisan, you are right. 

Mr. PARENTE. Yes, well, I am speaking from the value of tenure. 

So what I am trying to say is that this thing that we are discussing, interstate commerce of sales of health insurance, could reduce, and actually from our research, shows would reduce the number of people who cannot buy coverage because the price points are 

too high from the mandates. 

And what I want to know is how can the human physiology be 

so different across states that the mandates have such wide 

swings? Or is it the true difference is simply a difference in lobbying skill across the states in conjunction with insurance commissioners? 

Mr. PITTS. The chair thanks the gentleman and yields to the gentleman from New York, Mr. Engel, for 5 minutes for questions. 

Mr. ENGEL. Thank you very much, Mr. Chairman. I appreciate 

it. 

I would like to start by saying I am very concerned that we are 

holding this hearing today to discuss H.R. 371, legislation that 

would facilitate the purchase of insurance coverage across state 

lines. And my concern is the fact that H.R. 371 preempts state consumer protections that are critical to the quality of care and health 

of a patient. And in addition, this legislation repeals all insurance 

reforms and patient protections that were included in the Affordable Care Act. I think it is throwing the baby out with the bath 

water. 

I find it aggravating, disappointing, and frustrating that this 

committee has continuously done nothing but take up legislation 

that would repeal the Affordable Care Act, punish patients, and 

put the insurance companies back in control of our health system. 

I would like to direct my question to Mr. Larsen. Mr. Larsen, 

many states have spent years developing standards for insurance 

plans that they believe not only provide adequate minimum coverage for beneficiaries, but also make sure that providers will be 

adequately reimbursed for services rendered. If we allow the purchase of insurance policies across state lines, why wouldn’t employers look to purchase insurance on the basis of the least cost to 

them and not on the basis of whether it will adequately provide 

coverage or payments to providers? I would call it a race to the bottom; would you? 

Mr. LARSEN. I think that is exactly right. You are going to see 

companies, both the insurers and the companies, looking for the 

market that has the thinnest and therefore cheapest coverage. And, 

93 

of course, everyone wants inexpensive coverage until they get sick, 

and then they want comprehensive coverage. That is why we have 

got to get a comprehensive benefit package that is available to everyone, that is still affordable. 

But when you go down this route, you end up segregating the 

market, and the young people get peeled off and the healthy people 

get peeled off, and what you have left in a market is sicker people 

who get sicker and more expensive, and you are not solving the 

problem. The only savings you are getting is from peeling off the 

healthy. 

Mr. ENGEL. That is why we have the individual mandate in the 

Affordable Health Care Act, because if everybody is insured, then 

everybody has the good coverage and you don’t cherry-pick or, as 

you say, have a situation where everybody wants to pay a minimum and then wants maximum coverage when they do get sick. 

You know, when you are 26 or 27—my kids are around that 

age—you think you are never getting sick. And then suddenly 

there is an accident or whatever, and then you find out that you 

are sick. And if you are uninsured, where do you go? You go right 

to the emergency room, which is the most expensive health care for 

everybody, and we are all paying for it. 

Now a number of states, including my home state of New York, 

have developed programs that assure that if a given insurer in 

their state were to go under, that the state would step in and pay 

the bills, assuring that the affected customers would have access 

to care and providers are paid. 

So let me ask you this: As a former insurance commissioner, can 

you tell me if we allow interstate purchase of insurance, how would 

individual states protect their citizens and providers from the insolvency of an insurer? 

Mr. LARSEN. And with all the talk about health care reform, you 

know, that is one of the critical functions of what states do, is 

make sure that the companies are there when the claims need to 

be paid. So solvency regulation is critical. And if you lose your ability to ensure the solvency of companies that are selling policies to 

people in your state, that is a huge loss. 

Mr. ENGEL. Thank you. 

Dr. Parente, I saw you shaking—nodding your head, so I was 

wondering if you have any comment. 

Mr. PARENTE. No, I agree. What we are talking about in these 

laws doesn’t get rid of insurance commissioners’ functions at all. It 

lets the insurance commissioners basically be accountable to lobbyists, that the stuff comes in for the individual mandates and say, 

Do you realize by putting that mandate into place, you have now 

priced out somebody that otherwise really needs this care from 

being able to afford it, and basically makes that more of a dynamic 

economy about understanding the pros and cons of having that lobbying function. 

It is great to have protections, but they don’t come without cost, 

because at the end of the day an actuary will look at anything that 

you add, and put ‘‘This will now add cost to it.’’ It has already happened with ACA, even though people didn’t think that would happen when it was first developed. 

Mr. ENGEL. Thank you. Mr. Chairman, I yield back. Thank you. 

94 

Mr. PITTS. The chair thanks the gentleman. That concludes our 

questioning. 

This was an excellent panel. I want to thank all the witnesses 

and members for their participation. I remind members that they 

have 10 business days to submit questions for the record, and I ask 

that the witnesses all agree to respond promptly to those questions. 

Mr. PITTS. This subcommittee is now adjourned. 

[Whereupon, at 12:19 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. LEONARD LANCE

I want to thank Chairman Pitts for scheduling a hearing on this very important 

subject. 

Mr. Chairman, many experts agree that the high cost of health care is a key contributing factor to the high number of uninsured Americans. A survey done by the 

Employee Benefit Research Institute found that 85 percent of uninsured workers reported that they did not have coverage because it was either, ‘‘too expensive or they 

could not afford it.’’ 

The cost of health care is rising rapidly. It is imperative that Congress enact innovative solutions to make health insurance coverage more affordable for individuals 

and small businesses alike. Allowing the purchase of health care coverage across 

state lines will increase competition and choice, drive down prices and could dramatically reduce the number of uninsured. 

I look forward to hearing this morning’s testimony and am ready to work in a 

bipartisan capacity to promote interstate purchase of health coverage and expand 

the number of affordable health care options for all Americans. 

PREPARED STATEMENT OF HON. JOHN D. DINGELL

Thank you Mr. Chairman. 

Today’s hearing focuses on a topic that should be familiar to some Members of 

this Committee. H.R. 371, the Health Care Choices Act of 2011, is strikingly similar 

to H.R. 2355, the Health Care Choices Act of 2005. Although as we have seen in 

the 112th Congress, my colleagues would not dare miss an opportunity to strike 

away at the heart of the Affordable Care Act, and have included in H.R. 371 language to repeal the consumer protections that make up the Patients Bill of Rights. 

Now I know that good legislating is a difficult process, but continually reaching 

back to the arsenal of old legislation does nothing to help move our debate and discussion around improving our health care system forward. 

Quite frankly Mr. Chairman, this is legislation that is not needed. states can already pass laws to allow for the sale of health insurance across state lines. Further, 

the Affordable Care Act, which my colleagues on the other side profess to hate so 

much, would allow for states to band together to enter into a health care choice compact that would allow for the sale of insurance across state lines while also maintaining the critical consumer protections. 

Allowing such a reckless piece of legislation to move forward would be a race to 

the bottom—for our health care system and for our nation’s health. 

We will see insurance companies fleeing for whatever state will either let the industry write the regulations or ensure the least amount of oversight and restrictions 

on their practices, guaranteeing overwhelming profits for their coffers, and drastic 

cuts in the coverage available to those most in need of health insurance. This will 

harm the sick, the elderly, and the disabled—all of whom already pay high costs 

for their medical care. 

This should not be a surprise to my colleagues as we have seen this exact situation play out in the credit card industry. 

My colleagues point out that this legislation will help to lower premiums, and 

highlight the differences in premiums between New York and Iowa. If a New York 

family is able purchase their insurance in Iowa they may see lower premiums, but 

this will not the lower the cost of a medical service in New York. If I was a smart 

businessman in Iowa, why would I choose to cover a New York family knowing the 

high cost of medical services there? 

Reduced insurance premiums for some people are little consolation for the consumers who, under H.R. 371, would be left without coverage or would no longer 

95 

have coverage for critically needed benefit such as diabetes care or maternity care 

or cancer treatment. 

Insurance companies would be empowered to avoid caring for the sick people who 

cut into their profit margin and would instead look for the young and healthy who 

afford them the greatest opportunity for profit and the least opportunity for payoff 

and payout. 

I hope that today’s hearing will be a useful one for my colleagues, and I hope that 

this hearing will help to show that the solution proposed in the Health Care Choice 

Act will not help to protect our people from serious wrongdoing and will instead 

allow the rascals who have been able to exploit the weakness of the current system 

to achieve great economic success. 

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