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20–983 2017

HEALTH CARE SOLUTIONS: INCREASING PATIENT 

CHOICE AND PLAN INNOVATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

MAY 11, 2016 

Serial No. 114–143 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, OKlahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

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 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

BRETT GUTHRIE, Kentucky 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

GENE GREEN, Texas 

Ranking Member 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

DORIS O. MATSUI, California 

BEN RAY LUJA ́ N, New Mexico 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

FRANK PALLONE, JR., New Jersey (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 .......................................................................................... 3 

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

opening statement ................................................................................................ 4 

Prepared statement .......................................................................................... 5 

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

New Jersey, opening statement .......................................................................... 5 

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

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 8 

WITNESSES

Scott Gottlieb, M.D., Resident Fellow, American Enterprise Institute ............... 10 

Prepared statement .......................................................................................... 13 

Answers to submitted questions 1 ................................................................... 73 

Avik Roy, Senior Fellow, Manhattan Institute ..................................................... 24 

Prepared statement .......................................................................................... 26 

Sabrina Corlette, J.D., Research Professor, Center on Health Insurance Reforms, Georgetown University ............................................................................ 34 

Prepared statement .......................................................................................... 36 

Answers to submitted questions ...................................................................... 75 

SUBMITTED MATERIAL

Statement of the Committee for Economic Development, submitted by Mr. 

Pitts 2

1 Mr. Gottlieb did not respond to questions for the record. 2 Available at: http://docs.house.gov/meetings/if/if14/20160511/104905/ 

hhrg-114-if14-20160511-sd003.pdf. 

(1) 

HEALTH CARE SOLUTIONS: INCREASING 

PATIENT CHOICE AND PLAN INNOVATION 

WEDNESDAY, MAY 11, 2016, 

SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 9:58 a.m., in room 

2322, Rayburn House Office Building, Hon. Joseph R. Pitts (chairman of the subcommittee) presiding. 

Present: Representatives Pitts, Guthrie, Shimkus, Murphy, Burgess, Blackburn, Lance, Griffith, Bilirakis, Long, Ellmers, Bucshon, 

Brooks, Collins, Upton (ex officio), Green, Engel, Capps, Schakowsky, Butterfield, Sarbanes, Matsui, Schrader, Kennedy, 

Ca ́ rdenas, Pallone (ex officio). 

Staff Present: Adam Buckalew, Professional Staff Member; Rebecca Card, Assistant Press Secretary; Graham Pittman, Legislative Clerk; Chris Sarley, Policy Coordinator, Environment & Economy; Jennifer Sherman, Press Secretary; Kyle Fischer, Minority 

Health Fellow; Tiffany Gurascio, Minority Deputy Staff Director 

and Chief Health Advisor; Samantha Satchell, Minority Policy Analyst; and Arielle Woronoff, Minority Health Counsel. 

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

OF PENNSYLVANIA 

Mr. PITTS. The time of 10 o’clock having arrived, we will call the 

subcommittee to order. The chair will recognize himself for an 

opening statement. 

The subcommittee is holding a hearing today to take a closer 

look at healthcare solutions centered on promoting patient choice 

and innovation in the design of health coverage. 

Health care is the most personal of any political issue, and when 

Congress gets involved in health policy we are changing people’s 

lives. Decisions we make in Washington can have a tremendous effect on the well-being of families and their budgets. 

A country in which 45 million people went without health insurance was certainly in need of health reform. However, the Affordable Care Act is not the health reform this country needed. In fact, 

I believe it is a setback that makes true reform even harder to accomplish. 

The first thing health reform should accomplish is to stabilize or 

reduce the cost of health care. The number one complaint people 

have about health care is the rising cost. And yet the ACA has 

done little to decrease healthcare spending. In fact, many AmeriVerDate Nov 24 2008 11:27 Sep 07, 2017 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-143 CHRIS
2 

cans are paying higher premiums and deductibles for health insurance and care as a result of the law. We can do better. 

We must make healthcare costs more transparent and give people the freedom to choose the insurance that they want, with the 

benefits that they value most, at a price that is fair. More government bureaucracy, regulations, and spending never successfully reduced the price of health care. 

Yet that is exactly the premise of how health insurance is regulated today with top-down mandates that empower Washington 

and remove control over healthcare decisions from states and small 

businesses and families and individuals. And this has to be 

changed if we truly want bottom-up solutions that provide better 

care at lower costs for patients. 

Some of the free enterprise solutions that I believe would truly 

help control costs and improve health care for all include portability, more pooling options, strengthening consumer-driven arrangements like health savings accounts, and innovation through 

less Federal benefit mandates. 

Employer-sponsored insurance is a critical part of our healthcare 

system and must be protected, but for many their health insurance 

is too closely tied to employment. People who are laid off, fired, or 

have to quit working can find themselves uninsured at a time 

when they can least afford it. We need better options so patients 

can truly own a plan of their choosing on the individual market. 

Before the President’s healthcare law, I introduced the Small 

Business Choice Act, which would allow small businesses to form 

private health insurance cooperatives to buy insurance at lower 

rates while transferring catastrophic costs to a larger insurer, and 

the bill helps make small employers offer health insurance through 

a refundable tax credit of 65 percent, and self-employed people 

would save $5,000 a year on health insurance, and other small 

firms would save more than 34 percent. 

Similarly, association health plans, AHPs, could allow rotary 

clubs, professional associations, and other groups to band together 

across state lines, form their own health plans, increasing their 

purchasing power and lowering costs. 

Health savings accounts should also be strengthened, and these 

accounts allow individuals to save money in an account they control, using the money to pay for everyday medical expenses. Only 

when major medical expenses are incurred does the insurance company step in after a high deductible paid out of the HSA is met. 

HSAs encourage individuals to make smart spending decisions, and 

cost them less over time than traditional insurance. 

We should never forget that innovation comes almost exclusively 

from the private sector. New drugs, therapies, and cures will only 

be developed if the companies that develop them are able to commercialize them. Empowering Washington is not the way we are 

going to promote innovation and invention. 

So our hearing today will examine options to reform insurance 

markets to better serve patients and examine better paths forward. 

My time has expired. With that I recognize Ms. Matsui, who is 

filling in as ranking member, for 5 minutes for an opening statement. 

[The prepared statement of Mr. Pitts follows:] 

3 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The subcommittee will come to order. 

The Chairman will recognize himself for an opening statement. 

Today’s hearing will take a closer look at health care solutions centered around 

patient choices and limiting, or even ending, government’s role as an insurance regulator to allow insurance plans to innovate. 

Health care is the most personal of any political issue. When Congress gets involved in health policy, we are changing peoples’ lives. Decisions we make in Washington can have a tremendous effect on the well-being of families and their budgets. 

A country in which 45 million people went without health insurance was certainly 

in need of health reform. However, the Affordable Care Act is not the health reform 

this country needed. 

In fact, I believe it is a tremendous setback and makes true reform even harder 

to accomplish. 

The first thing health reform should accomplish is to stabilize or reduce the costs 

of health care. The number one complaint people have about health care is the rising cost, and yet the ACA has done nothing to decrease health care spending. In 

fact, many Americans are paying more for health insurance and care as a result of 

the law. 

We can do better. Government bureaucracy and rules can never hope to contain 

costs. We must make health care costs more transparent and give people the freedom to choose the insurance that they want. 

I do not believe that more government bureaucracy, regulations, and spending 

will ever successfully control the price of health care. We have to put individuals 

and families in charge of their own health care. They need adequate information 

in order to make smart decisions and the freedom to choose what works best for 

them. Some of the free market solutions that I believe would truly help control costs 

and improve health care for all includes portability, more pooling options, consumerdriven arrangements, and innovation through vibrant plan competition. 

For many, their health insurance is too closely tied to employment. People who 

are laid off, fired, or have to quit working can find themselves uninsured at a time 

when they can least afford it. Patients should be able to own their insurance plan, 

and take it with them, even if they enter into the individual market. 

Before the president’s health care law, I introduced the Small Business CHOICE 

Act, which would allow small businesses to form private health insurance cooperatives to buy insurance at lower rates while transferring catastrophic costs to a larger insurer. The bill helps small employers offer health insurance through a refundable tax credit of 65 percent. Self-employed people would save $5,000 a year on 

health insurance, and other small firms would save more than 34 percent. 

Similarly, association health plans (AHPs) could allow Rotary clubs, professional 

associations and other groups to band together across state lines and form their own 

health plans, increasing their purchasing power and lowering costs. 

Also, lack of consumer control has the effect of reducing people’s motivation to 

make their own responsible decisions. There is little incentive to make wise decisions about when to see a doctor or to make healthy lifestyle choices. Instead, insurance companies try to reduce costs by requiring doctor referrals and insurance precertification. A better way to help people make responsible decisions it to transfer 

the motivation to be frugal from the insurance company to the individual. 

Health Savings Accounts (HSAs), created in 2003 by Republicans but still underused, allow individuals to save money in an account they control, using the money 

to pay for everyday medical expenses. Only when major medical expenses are incurred does the insurance company step in, after a high deductible (paid out of the 

HSA) is met. HSAs encourage individuals to make smart spending decisions and 

cost them less over time than traditional insurance. 

We should never forget that innovation comes almost exclusively from the private 

sector. New drugs, therapies, and cures will only be developed if the companies that 

develop them are able to commercialize them. We should not nationalize healthcare 

and we should not weigh down innovation and invention with unnecessary new 

taxes and regulations. 

Our hearing today will examine options to reform insurance markets to better 

serve patients. 

Ms. MATSUI. Mr. Chairman, I would like to reserve the time for 

Mr. Green until he returns. 

Mr. PITTS. All right. That is fine. 

Does anyone else seek time? 

4 

All right. We will go to our chairman of the full committee, Mr. 

Upton, for 5 minutes for an opening statement. 

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

Mr. UPTON. Thank you, Mr. Chairman. 

Today’s hearing is an important discussion on what Congress can 

do to help Americans across the country access better care at, indeed, a lower cost. Individuals and families across the country are 

seeing growing premiums and deductibles, yet are seeing provider 

networks narrow and restrict access to life-saving medicines and 

treatments. Folks in my State, as well as across the country, are 

frustrated. The healthcare system was turned upside down. Promises were not kept. Costs have gone up, while quality has often deteriorated. 

So we have to chart a better path forward to reforming our insurance markets so that they can better serve the patients. That is 

what this effort is all about. We can strengthen health coverage by 

expanding plan offerings that allow for real choice, as well as 

incentivizing market innovation without the mandates. 

I have laid out a number of ideas to do this in the Patient CARE 

Act that I authorized with Senators Hatch and Burr, and our committee members have laid out dozens and dozens of ideas that put 

the power to choose in the hands of patients. 

So let’s establish another point from the start. House Republicans believe that no patient should be denied coverage or experience coverage shortages simply because they are sick. There are 

various ideas of how to accomplish our goals without interrupting 

the health insurance market, including guaranteed issue and continuous coverage protections. Continuous coverage means that if a 

patient gets a new job or retires or switches plans because their 

family moves, whatever, they will not be charged more than the 

standard rates, even if they are dealing with a serious medical 

issue or, as we know it, preexisting condition. 

Protecting our most vulnerable patients with preexisting condition safeguards is just as much about helping them keep health 

coverage as it is about creating an environment for them to get 

health coverage. Continued enrollment can lead to lower costs and 

stable markets, which gives consumers a pathway to choose more 

innovative options. 

So today we are going to talk about ways to achieve this through 

market reforms instead of government mandates, by encouraging 

States to lower costs through premium reduction programs. Options like advanced high-risk pools can also open new access points 

to the market while helping keep patient costs down. 

Headlines across the country confirm that patients are paying 

higher premiums and seeing fewer options. Patients are exiting the 

marketplace. Plans are leaving the exchanges. So simply put, we 

are 6 years into the President’s healthcare law, and it is not working the way people thought it might. 

One disturbing fact that confirms the need for reform is that 19 

of the 37 States on healthcare.gov—19 of the 37—saw double-digit 

premium increases for the second-lowest-cost silver plan. Even 

worse, three of those States saw benchmark rates go up to 30 perVerDate Nov 24 2008 11:27 Sep 07, 2017 Jkt 037690 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-143 CHRIS
5 

cent. And S&P reported Monday that individual market costs 

jumped 23 percent in 2015. 

That is why we are here today, to discuss the merits of idea for 

increasing patient choices and incentivizing plan innovation. I look 

forward to the witnesses’ testimony and would yield to any Republicans on my side. I yield back the balance of my time. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Today’s hearing is an important discussion on what Congress can do to help 

Americans across the country access better care at a lower cost. Individuals and 

families across the country are seeing growing premiums and deductibles, yet are 

seeing provider networks narrow and restrict access to life-saving medicines and 

treatments. Folks in Michigan and the country are frustrated. The health care system was turned upside down, promises were not kept, costs have gone up while 

quality has deteriorated. 

We have to chart a better path forward to reforming our insurance markets so 

they better serve the patients. That’s what this effort is all about. We can strengthen health coverage by expanding plan offerings that allow for real choice—as well 

as incentivizing market innovation without mandates. I have laid out many ideas 

to do this in the Patient CARE Act that I authored with Senators Orrin Hatch and 

Richard Burr. And our committee members have laid out dozens of ideas that put 

the power to choose in the hands of patients. 

Let’s establish another point from the start: House Republicans believe that no 

patient should be denied coverage or experience coverage shortages simply because 

they are sick. 

There are various ideas of how to accomplish our goals without interrupting the 

health insurance market; including providing guaranteed issue and continuous coverage protections. Continuous coverage means that if a patient gets a new job, retires, or switches plans because their family moves, they will not be charged more 

than standard rates—even if they are dealing with a serious medical issue. 

Protecting our most vulnerable patients with pre-existing condition safeguards is 

just as much about helping them keep health coverage as it is about creating an 

environment for them to get health coverage. Continued enrollment can lead to 

lower costs and stable markets, which gives consumers a pathway to choose more 

innovative options. 

Today, we will talk about ways to achieve this through market reforms instead 

of government mandates, like encouraging states to lower costs through premium 

reduction programs. Options, like advanced high risk pools, can also open new access points to the market while helping keep patient costs down. 

Headlines across the country confirm that patients are paying higher premiums 

and seeing fewer options. Patients are exiting the marketplace. Plans are leaving 

the exchanges. 

Simply put, we are 6 years into the president’s health care law and it is not working. One disturbing fact that confirms the need for reform is that 19 of the 37 states 

on HealthCare.gov saw double-digit premium increases for the second-lowest cost 

silver plan. Even worse, three of these states saw benchmark rates go up 30 percent. And S&P reported Monday that individual market costs jumped 23 percent in 

2015. 

This is why we are here today—to discuss the merits of ideas for increasing patient choice and incentivizing plan innovation. I look forward to the witness testimony and I encourage a thoughtful dialogue about ideas. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the ranking member of the full committee, Mr. 

Pallone, 5 minutes for opening statement. 

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

Mr. PALLONE. Thank you, Mr. Chairman. 

6 

I believe we all share a common goal. We want a healthcare system that is more affordable, accessible, and higher quality, a system that works for all Americans. 

Now, how we achieve this goal tends to be a topic of intense debate, and it should be. The Affordable Care Act has greatly expanded access to quality, affordable health insurance in our country. There is, however, more that we can do to improve our health 

system for everyone. 

I believe the ACA has been a success. Twenty million more people now have health insurance. Women, minorities, and young people in particular have experienced substantial gains in coverage. 

Since 2013, the uninsured rate amongst young adults has dropped 

by 47 percent. And together we should be discussing how we can 

build on this success to give even more Americans the peace of 

mind that quality health insurance provides. 

The law also put in place important consumer protections that 

prevent insurers from discriminating against the most vulnerable, 

and it eliminated out-of-pocket costs for important preventative 

services, such as immunizations and cancer screenings. 

While we know the marketplaces still need time and room to 

grow, we can’t forget what the individual market was like before 

the Affordable Care Act. Double-digit rate increases on subpar 

plans were the norm. The ACA gave HHS and States the tools they 

need to monitor insurers and put a stop to these harmful practices. 

This rate review program brings transparency to the process, 

greater stability to the market, and protects individuals from unreasonable price increases. It also resulted in subpar plans simply 

no longer being sold if they don’t cover hospitalizations or prescription drugs or have limits on how much health care will be covered 

in a given year. 

The medical loss ratio ensures that insurers spend at least 80 

percent of premium dollars on actual health care and not executive 

bonuses or advertising. 

The ACA also created an entirely new marketplace that expanded coverage to individuals who prior to the Affordable Care 

Act had little to no hope of finding affordable health insurance. Our 

witnesses today will talk about giving consumers more choices, but 

let’s not lose sight of the fact that before the ACA, millions of 

Americans with preexisting conditions had no choices at all. 

These marketplaces are still in their infancy and will continue to 

mature over time as insurers become more accustomed to calculating risk and as more individuals transition from grandfathered 

and grandmothered plans to marketplace plans. 

Creating a competitive and successful market in a system as 

complex as our own is certainly no small feat. Millions of Americans count on this coverage and therefore we should do everything 

we can to make sure that these marketplaces grow even stronger. 

And this hearing has the potential to be a starting point for a 

real discussion on bipartisan improvements that will strengthen 

the systems already in place and bring us even closer to high-quality, universal coverage. However, I also recognize that this hearing 

has the potential to be a continuation of a 6-year Republican assault against the Affordable Care Act and the millions of Americans who benefit from it. 

7 

The ACA’s marketplaces put power back into the hands of consumers, gave everyone the right to buy insurance, and forced insurers to compete based on price and value. We can’t return to a time 

when insurers competed to find the healthiest, least-expensive consumers and left millions of Americans to fend for themselves. I 

think we have a duty to overcome partisan politics and work together to come up with the best solutions, and I am hoping that 

we will use our time today to do just that. 

And I would like to yield the remainder of my time to the gentlewoman from California, Ms. Matsui. 

[The prepared statement of Mr. Pallone follows:] 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

Good morning everyone and thank you to the witnesses for being here today. I 

believe we all share a common goal: we want a health care system that’s more affordable, accessible, and higher quality-a system that works for all Americans. Now, 

how we achieve this goal tends to be a topic of intense debate, and it should be. 

The Affordable Care Act has greatly expanded access to quality, affordable health 

insurance in our country. There is, however, more that we can do to improve our 

health system for everyone. 

The ACA has been a success. Twenty million more people now have health insurance. Women, minorities, and young people in particular have experienced substantial gains in coverage. Since 2013 the uninsured rate among young adults has 

dropped by 47 percent. Together, we should be discussing how we can build on this 

success to give even more Americans the peace of mind quality health insurance 

provides. The law also put in place important consumer protections that prevent insurers from discriminating against the most vulnerable, and it eliminated out of 

pocket costs for important preventative services, such as immunizations and cancer 

screenings. 

While we know the marketplaces still need time and room to grow, we cannot forget what the individual market was like before the ACA. Double-digit rate increases 

on sub-par plans were the norm. The ACA gave HHS and states the tools they need 

to monitor insurers and put a stop to these harmful practices. This rate review program brings transparency to the process, greater stability to the market and protects individuals from unreasonable price increases. It also resulted in sub-par plans 

simply no longer being sold if they don’t cover hospitalizations or prescription drugs 

or have limits on how much health care will be covered in a given year. The Medical 

Loss Ratio ensures that issuers spend at least 80 percent of premium dollars on actual health care, not executive bonuses or advertising. 

The ACA created an entirely new marketplace that expanded coverage to individuals who prior to the ACA had little to no hope of finding affordable health care. 

Our witnesses today will talk about giving consumers more choices, but let’s not lose 

sight of the fact that before the ACA, millions of Americans with pre-existing conditions had NO choices. 

These marketplaces are still in their infancy and will continue to mature over 

time as insurers become more accustomed to calculating risk, and as more individuals transition from ‘‘grandfathered’’ and ‘‘grandmothered’’ plans to marketplace 

plans. Creating a competitive and successful market in a system as complex as our 

own is no small feat. Millions of Americans depend on this coverage, and therefore 

we should do everything we can to make sure these marketplaces grow even stronger. 

This hearing has the potential to be a starting point for a real discussion on bipartisan improvements that will strengthen the systems already in place and bring us 

even closer to high quality universal coverage. However, I also recognize that this 

hearing has the potential to be a continuation of a six year Republican assault 

against the ACA and the millions of Americans who benefit from it. The ACA’s marketplaces put power back into the hands of consumers, gave everyone the right to 

buy insurance, and forced insurers to compete based on price and value. We cannot 

return to a time when insurers competed to find the healthiest, least expensive consumers and left millions of Americans to fend for themselves. 

We have a duty to overcome partisan politics and work together to come up with 

the best solutions. I’m hoping that we will use our time today to do just that. Thank 

you. 

8 

Ms. MATSUI. Thank you very much. 

The Affordable Care Act is improving millions of Americans’ 

lives. Thanks to the ACA, nearly 18 million previously uninsured 

Americans no longer have to worry that they are one illness away 

from financial ruin. 

The Affordable Care Act is intertwined into the fabric of our 

healthcare system. It is time to recognize the ACA as the law of 

the land so we can move forward with the business of ensuring 

that every American has the opportunity to live a healthy life. As 

members of the Health Subcommittee, that should be our mission. 

Today we are talking about market reforms that increase transparency and access for patients. Because of the ACA, patients with 

preexisting conditions who never had a choice when it came to 

their health care now have options. These protections are particularly important for those over 30 million individuals in this country 

who suffer from rare or serious chronic diseases. 

The ACA has helped millions of families gain access to quality, 

affordable coverage, and I do hope that our committee can work together to continue this progress to improve the health and lives of 

Americans. 

I yield the remainder of my time back to the ranking member. 

Mr. PITTS. The gentleman’s time has expired. 

The chair now recognizes the ranking member of the subcommittee, Mr. Green, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman. And I will ask for dispensation because I was actually speaking to Bill Flores, the 

Chamber of Congress, and they asked too many questions. I may 

have been the only Democrat they heard from that day. 

I want to welcome our panel. Good morning, and thank you all 

for being here today. 

It has been almost 2 1⁄2 years since the full reforms of the Affordable Care Act went into effect. The third open enrollment period 

built off the successes of the first and second, and there is even 

reason to believe that the fourth open enrollment period will continue this trend. The marketplaces created under the Affordable 

Care Act are in their relative infancy. As with any other, almost 

every new market, particularly in the healthcare space, there will 

be changes and adjustments in the early years. Insurers will both 

enter and exit as they navigate the new landscape of millions of 

new consumers, protections, and requirements. 

Medicare, when it was first created, experienced growing pains, 

as did Medicare Advantage and the part D plans. You will hear reports sounding the alarm that in 2016, 39 insurers left the Federal 

marketplace. Maybe actuary reports fail to mention that in the 

same year, 40 insurers entered the marketplace. 

The number of issuers in every State has grown each year at a 

year-over-year average of 8 in 2014, 9 in 2015, and 10 in 2016. 

Nearly 90 percent of consumers that had coverage in 2015 had a 

choice of three or more insurers for the 2016 coverage. 

The unfiltered facts clearly indicate that the marketplace is an 

attractive place for issuers to do business and for consumers to 

9 

purchase quality, affordable insurance, many for the first time in 

their lives. 

Health insurance is a product that Americans want and need. 

The Affordable Care Act is creating a system that lends truth to 

the principle that health care is not a privilege for the few, but the 

right for all Americans. 

The Affordable Care Act has been resoundingly successful, but 

like any law, it is not perfect. As I have been known to say, if you 

want something done perfectly, don’t ever come to Congress. That 

is why, after passing major reforms, Congress has very often revisited the legislation and come together to improve it. 

While I don’t expect us to agree on a lot of solutions debated during this hearing, it is a welcome departure from the politically motivated hearings we have had over the last 6 years which were only 

designed to score points and attack the law rather than look for 

ways to improve the exchanges on behalf of the American people. 

I am hopeful this is a genuine step toward getting back to the business of legislating. I thank the chairman for calling it. 

The core strength of the ACA is that it puts power back in the 

hands of consumers, contains key provisions, and requires insurers 

to compete based on their ability to offer high-quality insurance at 

an affordable price. In the pre-ACA world, the individual market 

was unstable, unfair, and inaccessible to many. Insurers competed 

to find the healthiest and cheapest consumers, and those with preexisting conditions were largely priced out. Women could be 

charged more just because of their gender, annual and lifetime limits hindered patients’ ability to get care when they needed it, and 

people could be dropped from their plan when they got sick and 

needed it the most. 

In the post-ACA individual market, where everyone has the right 

to buy insurance and choices are transparent and easy to compare, 

consumers make issuers compete based on price and value, and 

with any market, some insurers are adapting faster than others to 

the new landscape. This is the nature of competition. 

Some insurers have already figured out how to succeed in the 

marketplace and they are growing and expanding their exchange 

business. Others will learn to adapt or else lose market share to 

those who already have. These are the features of a healthy market. This is the proof that ACA’s market-based reforms are working. 

There are definitely ways to improve the ACA, to expand coverage to more Americans, and to lower cost. I look forward to exploring these with my colleagues. And, for example, my friend and 

Texan, good friend Joe Barton and I have a requirement for 12- 

month continuous enrollment in Medicaid and CHIP. Continuous 

coverage brings down administration burden, provides for continuous care, and keeps folks healthier while bending the curve in the 

long run. 

Again, I want to thank our witnesses for being here today, and 

I look forward to getting back to the business of legislating. Thank 

you. 

Mr. PITTS. The chair thanks the gentleman. 

As usual, all members’ opening statements will be made a part 

of the record. 

10 

1The statement has been retained in committee files and is available at: http:// 

docs.house.gov/meetings/if/if14/20160511/104905/hhrg-114-if14-20160511-sd003.pdf. 

I seek unanimous consent to submit the following document for 

the record: a statement from the Committee for Economic Development. 1 Without objection, so ordered. 

Mr. PITTS. We have one panel before us today. I would like to 

thank you for coming. And I will introduce our panelists in the 

order of their giving testimony. 

First, we have Dr. Scott Gottlieb, resident fellow, American Enterprise Institute; Mr. Avik Roy, senior fellow, Manhattan Institute; and Sabrina Corlette, research professor, Center on Health 

Insurance Reform, Georgetown University. 

Thank you for coming today. Your written testimony will be 

made a part of the record. You will each be given 5 minutes to 

summarize your testimony. 

So at this point, Dr. Gottlieb, you are recognized for 5 minutes 

for your summary. 

STATEMENTS OF SCOTT GOTTLIEB, M.D., RESIDENT FELLOW, 

AMERICAN ENTERPRISE INSTITUTE; AVIK ROY, SENIOR FELLOW, MANHATTAN INSTITUTE; AND SABRINA CORLETTE, 

J.D., RESEARCH PROFESSOR, CENTER ON HEALTH INSURANCE REFORMS, GEORGETOWN UNIVERSITY 

STATEMENT OF SCOTT GOTTLIEB 

Dr. GOTTLIEB. Mr. Chairman, Mr. Vice Chairman, thank you for 

the opportunity to testify here today. 

My name is Scott Gottlieb. I am a physician and resident fellow 

at the American Enterprise Institute. I previously worked at CMS 

and FDA and have experienced and evaluated the insurance market as a provider, as a policy analyst, and as an investor in the 

space, and it is from three perspectives I want to offer some 

thoughts today. We face some continuing challenges with respect to 

our current insurance market and some new pressures, and I want 

to focus not on how we got here, but what we can do about it. 

Improving the existing market for insurance inside the statebased exchanges or transitioning to an entirely new framework for 

how we pool risk and help consumers buy coverage should include, 

in particular, four principles that I want to outline today. 

First, more rating and regulatory flexibility for insurance products to enable more competition between different and, hopefully, 

more innovative plans. I believe that regulatory standards and how 

CMS is interpreting its own rules limit the ability of plans to offer 

innovative designs. 

Because health plans must adhere to a narrow formula to fall 

within the discrete metal tiers, it leads to an environment where 

plans are designed from the top down, off actuarial targets, rather 

than based on a bottoms-up approach to build off principles that 

may lead to more innovation and coverage. 

To these ends, insurers can be required to simply report the actuarial value of their plans so long as they meet a minimum level 

of coverage. Instead of making decisions based on rigid targets that 

are tied to metals, consumers can make choices based on the actual 

actuarial value of the plan. 

11 

I believe allowing more regulatory flexibility around rating and 

plan design would enable a wider selection of high-value options, 

such as value-based insurance designs or designs that reduce premiums and other costs for consumers that stay with an insurer 

over time. 

Second, we need clear rules on open enrollment periods to enable 

a viable risk pool while using incentives rather than mandates as 

a way to keep people in the insurance market. We absolutely must 

maintain some exemptions for people who confront some discrete 

challenges obtaining coverage during open enrollment periods. But 

carefully defined enrollment windows can form a key element of 

rules that use incentives to encourage people to enter the insurance 

market and stay continuously insured, rather than relying on penalties to enable these same outcomes. 

Right now the lack of tightly defined enrollment periods, 

verification requirements, and fluid exemptions largely forecloses 

the ability to use the requirement for continuous coverage as a way 

to create incentives for people to get into and stay in the insurance 

market. 

Third, subsidies need to be tied more closely to risk, and risk adjustment must provide plans with incentives to enroll and improve 

the health of people with chronic conditions. In the plan that I 

helped co-author at AEI with my colleagues, we advocate a system 

of tax credits. These are set initially as a fixed-dollar amount based 

on age. Under our framework, older individuals would get larger 

subsidies reflecting their tendency to use more healthcare services. 

Another option is to match the magnitude of the tax credits more 

closely to the varying insurance costs that real purchasers will face 

in a less regulated market. This second option would make the tax 

credit amounts more open-ended initially in response to the premiums that may vary with age, geography, and perhaps some form 

of preexisting risk. This initial floating cost subsidy structure could 

then be adjusted in later years to set a ceiling on maximum tax 

benefits to curb overspending and add additional subsidies for more 

economically or medically vulnerable populations. 

Any approach should be coupled to proper risk adjustment so 

that health plans have an incentive to enroll individuals with certain preexisting conditions and improve their health. 

The credit the health plans receive can be adjusted prospectively 

based on a defined set of healthcare conditions and a methodology 

that the insurers agree to in advance, since they are the ones who 

know best where the economic sensitivities are. 

Fourth, and finally, we need to contemplate policies that offer incentives for new plan formation and alternatives to the hospital-led 

consolidation of providers that are driving up costs. With respect 

to health plans, there has been no new net health plan formation 

since 2008. By this, I mean new health carriers. I believe that a 

big culprit is the caps on the operating margins, which makes it 

hard for new plans to enter the market even with some of the concessions that are made available to startup plans. 

On the provider side, we need to consider policies to create alternatives to the consolidation of physicians around local hospitals, 

which is increasing in a number of markets and is giving a single 

12 

health system the sort of monopoly position that is driving up 

costs. 

Our healthcare reform should be aimed at increasing choice and 

competition as a way to give consumers more options and more opportunities to access affordable coverage. I hope that these concepts 

I outline here today can advance some of these goals, and I am 

grateful for the opportunity to testify before the committee. Thanks 

a lot. 

[The prepared statement of Dr. Gottlieb follows:] 

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Mr. PITTS. The chair thanks the gentleman. 

I now recognize Mr. Roy, 5 minutes for your summary. 

STATEMENT OF AVIK ROY 

Mr. ROY. Chairman Pitts, Ranking Member Green, and members 

of the Health Subcommittee of the Energy and Commerce Committee, thanks for inviting me to speak with you today. My name 

is Avik Roy. I am a senior fellow at the Manhattan Institute where 

I conduct research on health care reform. 

In my remarks, I will focus on two areas. First, I will discuss 

flaws in the design of the ACA’s insurance exchanges. Second, I 

will describe the principles and policies that Congress should consider in order to achieve better reform. 

The ACA has reduced the number of uninsured, but its premiums on the exchanges have been so high that enrollment in the 

exchanges has been poor. 2016 enrollment was around 11 million, 

far below the CBO’s original 21 million estimate. 

The exchanges were built on a theory called the three-legged 

stool. First, the law would impose a raft of regulations to transfer 

costs from the sick to the healthy. Second, it would impose an individual mandate in order to force the healthy to purchase this highly costly coverage. Third, it would lessen the burden of the mandate for the poor using subsidies. 

The problem is that the legs of the three-legged stool in the ACA 

were poorly designed. The regulatory leg is too long, driving up the 

cost of nongroup coverage. The mandate leg is too short, allowing 

healthier individuals to avoid buying costly coverage. And the subsidy leg is too wobbly to correct the imbalances of the other two 

legs. 

By far, the law’s most damaging regulation is its age-based community rating, forcing insurers to charge their oldest customers no 

more than three times what they charge their youngest. This has 

more than doubled the cost of health insurance for younger individuals in most States. Because the individual mandate’s fines are so 

small relative to the cost of this coverage, young people are staying 

out. For most Americans, the ACA’s subsidies don’t offset far higher premiums. As a result, exchange enrollment for people with incomes above 250 percent of the Federal poverty level is well below 

20 percent. 

Furthermore, the ACA’s subsidy system has proven to be extremely convoluted. It requires people to estimate their future income on a rolling monthly basis and then pay the government back 

if the Treasury Department determines that they have overestimated their eligibility. 

In 2014, MI published Transcending ObamaCare, a health reform plan that would cover more people than the ACA but with far 

less Federal intervention than either current or prior law. Here are 

some key concepts from that plan that Congress should consider. 

The most important thing Congress can do is to repeal the ACA’s 

three-to-one community rating age band, which makes coverage 

unaffordable for young people. This discriminatory policy is the single greatest driver of the exchange’s poor performance. Repeal of 

the age band can be paired with transitional funding for the nearelderly such that current enrollees can keep their current plan. 

25 

If the age band is repealed, a reformed system can preserve 

guaranteed issue and prohibit medical underwriting. In other 

words, it can protect those with preexisting conditions without an 

individual mandate. The mandate can be replaced with late enrollment penalties, a shorter open enrollment period, and the option 

of insurance contracts of 2 to 5 years instead of only 1 year on the 

current ACA exchanges. 

Congress should put patients back in charge of their own 

healthcare dollars wherever possible. It should maximize personal 

choice and improve the flexibility of health savings accounts. It 

should repeal the ACA’s tax increases, especially those like the 

health insurance tax, the medical device tax, and the drug tax, that 

directly translate into higher premiums. 

Finally, Congress should replace the ACA’s convoluted subsidy 

system with transparent, means-tested, age-adjusted tax credits. 

Some have proposed a uniform tax credit in which the poor and the 

wealthy receive the same financial assistance. That approach is unwise in my view because it severely limits the amount of assistance 

we can provide to the poor. 

In 2017, the average exchange subsidy per subsidized enrollee, 

according to CBO, will be $4,550. By contrast, one uniform tax 

credit proposal that has been widely circulated would offer a subsidy of $2,100 to those in middle age regardless of need. That difference would be highly disruptive to the poor and the sick and result in millions fewer insured. 

Instead, an ACA replacement should preserve a sliding scale of 

means-tested tax credits but do so based on income from the previous tax year. That way the IRS has verified income date with 

which to base its tax credit calculations. 

Based on our fiscal modeling, the reforms described above, combined with others, could reduce Federal spending by $10 trillion 

over the next three decades and increase the number of individuals 

with health insurance by 12 million over and above current law, 

and they would reduce the cost of single health insurance policies 

by 18 percent by 2021. 

The ACA’s shortcomings should not discourage Congress from 

striving to achieve the law’s stated goal, affordable health coverage 

for every American. That objective remains as important as ever. 

Thanks again for having me. I look forward to your questions 

and of being of further assistance to this committee. 

[The prepared statement of Mr. Roy follows:] 

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Mr. PITTS. The chair thanks the gentleman. 

Ms. Corlette, you are recognized for 5 minutes for your summary. 

STATEMENT OF SABRINA CORLETTE 

Ms. CORLETTE. Thank you, Chairman Pitts and Ranking Member 

Green. Thank you for the opportunity to testify today. 

I am going to make two primary points. First, the Affordable 

Care Act has led to an unprecedented expansion in access to affordable comprehensive health insurance. And second, 6 years in, we 

have new opportunities to build on and strengthen the law in order 

to ensure its benefits can be truly universal. 

The last time I sat before you, it was just after the launch of the 

ACA’s health insurance marketplaces. Many were questioning 

whether the law would work. What a difference 2 years makes. 

Since the rollout of the ACA, we have strong evidence of improved 

access, the ACA has expanded health insurance coverage to 20 million people, and as a result, the number of uninsured Americans 

is at its lowest level in 5 decades with almost 90 percent of people 

now covered, an end of health status discrimination. Up to 122 million Americans with a preexisting condition now have peace of 

mind that if they leave work to care for a loved one, start a new 

business, or go back to school, they will no longer be denied access 

to affordable health insurance. 

Improved quality of coverage. The ACA’s reforms have improved 

not only access to coverage, but the quality. The vast majority of 

people newly enrolled are satisfied with their new health insurance 

plan and the doctors in it. 

And bending the cost curve. The ACA has contributed to an unprecedented slowdown in healthcare cost growth. Further, several 

of the payment and delivery system reform experiments launched 

by the ACA are offering some hope that we can reduce waste, lower 

costs, and maintain the quality of care for patients. 

To understand how far we have come, it is helpful to pause and 

remember where we were before the ACA. Back then, the individual insurance market suffered from a lack of access. As many 

as 40 percent of applicants were denied coverage because of a preexisting condition. 

Inadequate coverage. Before the ACA, in most states insurers 

were permitted to permanently exclude any preexisting conditions, 

and many excluded maternity coverage, mental health, and prescription drugs as a matter of course. Deductibles of $10,000 or 

more were not uncommon, and many policies came with lifetime or 

annual caps on benefits. 

And coverage was often unaffordable. Before the ACA, 70 percent 

of people with health problems reported it very difficult or impossible to find an affordable plan. 

At the same time, none of the nightmare scenarios that some 

ACA opponents predicted have come to pass. The ACA has not 

caused employers to drop coverage for their workers, nor has it resulted in reductions in employment. On the whole, coverage trends 

for ESI have remained stable. 

No law is perfect, and the ACA is not perfect. Six years in, I encourage members of this subcommittee to consider some pragmatic 

improvements, including providing incentives to States to expand 

35 

Medicaid. In 19 states, families just below the poverty line are denied access to coverage because they don’t make enough money to 

be eligible for the marketplace tax credits. Congress should adopt 

the President’s proposal to allow any state that expands Medicaid 

to receive a 100 percent match for the first 3 years. 

Fix the family glitch. Congress can and should clarify the law to 

ensure that working families are able to access the tax credits. 

Improve affordability. Even with those tax credits and cost-sharing reductions, many low- and moderate-income Americans face 

very high costs when they purchase insurance. I encourage Congress to reduce the amount of income families are expected to contribute and to improve cost-sharing support. 

Support outreach and enrollment assistance. As many as 16 million Americans are eligible for but not enrolled in either Medicaid 

or subsidized marketplace insurance. Many just don’t know about 

the availability of these coverage options and the financial help, 

and they need assistance through the enrollment process. A relatively small investment in funds could ensure that more people 

are enrolled in the coverage that is right for them. 

And make the plan shopping experience as easy as possible. The 

marketplaces need a stronger infrastructure to support eligibility 

determinations and the plan shopping experience. This should include improved call centers and appeals processes, as well as better 

Web-based tools. 

The ACA has ushered in much-needed reforms that have dramatically improved access to affordable, high-quality coverage. In 

just 2 short years, these changes have helped to reduce the percentage of uninsured to its lowest point in over a generation, and 

that is a huge accomplishment. However, we are also beginning to 

see areas in which we can build on and improve the law to make 

it work better for more people. 

I look forward to the discussion of how best to achieve that. 

Thank you. 

[The prepared statement of Ms. Corlette follows:] 

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Mr. PITTS. The chair thanks the gentlelady, thanks each of our 

witnesses for your testimony. You have each provided thoughtful 

testimony. And so we will now begin questioning. I will recognize 

myself for 5 minutes for that purpose. 

Mr. Roy, we will begin with you. You have advised several highlevel officials and candidates on health policy. Would you please describe some of the commonalities in the health reform plans offered 

by conservatives? 

Mr. ROY. Yes. So I was also a co-author of the plan that Dr. Gottlieb mentioned that was published by the American Enterprise Institute. So to take that plan as an example and the plan that we 

published at the Manhattan Institute as two examples, both of 

them the common element is replacing the ACA with a system of 

tax credits in which patients control their own healthcare dollars. 

The challenge with the ACA is twofold. One, a lot of discrimination against younger and healthy enrollees. And, two, the fact that 

there is very limited choice in the type of health insurance you can 

buy. 

And so the key commonalities here are to offer tax credits that 

help the uninsured afford coverage, but to make sure that people 

have a much wider range of choices in how they purchase coverage 

and the type of coverage they buy, and also to make sure that they 

have the opportunity not simply to use insurance to pay for health 

care, but to use health savings accounts. 

Mr. PITTS. Thank you. 

Dr. Gottlieb, in addition to being a physician, you have counseled 

various healthcare companies and firms on Federal policy. Would 

you please talk about any of the components of previous or current 

alternatives to the Affordable Care Act that you are convinced will 

increase choice and competition? 

Dr. GOTTLIEB. I will just touch on one. I think in terms of new 

health plan formation and new carriers entering the market, probably the single biggest obstacle has been the caps on the operating 

margins of plans, and I am talking here about the caps on the 

MLR. Because a new plan is going to have to spend a higher 

amount of its revenue on its overhead at the outset, and by capping 

the operating margin, you are discouraging capital formation, new 

carriers from entering the market. 

If you look at what has happened since 2008, there has been no 

new net health plan formation, and by that I mean new carriers. 

So when we talk about new health plans entering the market, we 

are talking about existing insurers just entering exchanges with 

differently named products but not new health insurers. 

And the analysis I am talking about actually goes back to last 

year, and it incorporated all the co-ops and the provider-sponsored 

plans. A lot of those—some of those have exited the market. 

So I would submit that it is probably the case, that there has 

been a net formation of new healthcare carriers since 2008. 

Mr. PITTS. Would the result or the effect of such components result in lower costs for patients? 

Dr. GOTTLIEB. Well, I think the opportunity for new plans to 

enter the market is going to result in more competition between 

different insurers and ultimately is going to lead to lower costs. I 

think when we look at premium costs, in particular for individuals, 

45 

we have to look at it on a weighted basis, meaning that we look 

at the average premium increase, but we need to look at premium 

increases on the basis of where people are enrolling. 

And it is the case that premiums are going up for the plans that 

have the highest enrollment because they are the ones facing the 

biggest losses in the market right now. I think by creating more 

competition between different plans, ultimately you are going to 

create more competition between premiums as well. 

Mr. PITTS. Thank you. 

Ms. Corlette, you mentioned that, ‘‘Even with the ACA’s premium tax credits and cost-sharing reductions, many low- and moderate-income Americans face very high cost when they purchase insurance.’’ 

Absent more government mandates, more Federal spending, 

what would you propose that would help these patients receive care 

at a fair cost? 

Ms. CORLETTE. Thank you, Mr. Chairman. 

So one of the problems is that health insurance itself is an extremely expensive product. The average family premium for an employer-based plan is in the neighborhood of $17,000 a year. So I 

think you are absolutely correct to point out, and as I pointed out 

and others have in their testimony, the Federal Government can’t 

pick up that entire tab. So the key is to get at what is driving that $17,000 cost for a 

family policy, which is extremely expensive. And that, frankly, goes 

to the fact that we have an inefficient delivery system. We are 

spending 30 percent of healthcare DDP on wasteful and unnecessary care. 

So, frankly, my proposals for getting at cost containment in 

health insurance would really target the delivery system and the 

way we pay for the delivery of those healthcare services. 

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

The chair now recognizes the ranking member, Mr. Green, 5 

minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

Again, I want to thank our witnesses. 

Mr. Roy, some of us were on the committee when we were drafting the Affordable Care Act in 2008 and 2009. I know it is something that somebody in academia may not understand, but we actually have to legislate, even when it is a majority of Democrats, just 

like a majority of Republicans. 

The Affordable Care Act was built on our traditional insurance 

system that was started during World War II and continued, where 

in our country, unlike the countries we rebuilt in World War II 

that created some type of national care, whether it be Japan, Germany, France, Europe. And so we were building on that. So free 

enterprise was involved in it. And that is why the Affordable Care 

Act, it is not government—of course we regulate insurance, but it 

is based on that. And that was the decision made, that we would 

use this tried-and-true method, even though I think it is not as effective as other plans. But that is why we have this. 

Of course my biggest issue in my home State of Texas is that 

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46 

trict, I have 50,000 constituents in an urban district in Houston 

who would have Medicaid if the states expanded it. I hope that my 

state will expand it, and I am willing to work with them. I have 

said this for a number of years. For every one dollar my home state 

would pay in Medicaid expansion, it would earn back $1.30 in new 

economic activity. 

But the hearing today is about private insurance and ways to 

make it stable. It is clear that marketplaces are working, and the 

individual insurance market increased in size by 46 percent in the 

first year of enrollment alone. We need to continue to improve, 

however, and insurance markets function best when there is a 

large number of customers to spread the risk and keep costs down. 

Before we consider revising or backtracking on the progress we 

have made, one important thing we can do to stabilize the individual insurance market is to grow it. The more people enrolled, 

the greater the risk pool, the more stability we will see. There are 

more than 10 million Americans who are uninsured and eligible for 

marketplace coverage. Seven million of those were eligible for tax 

credits to help them pay their premiums. 

Ms. Corlette, initial research shows that Americans have a wide 

variation in knowledge of the options available on the ACA’s exchanges and the assistance that can be made available. Could you 

discuss some of the harder-to-reach marketplace populations? 

Ms. CORLETTE. Yes. Thank you. 

So estimates are that we have between 29 and 31 million uninsured Americans, and many of them are uninsured because, as you 

point out, Congressman, they are in the Medicaid coverage gap. 

Mr. GREEN. So that includes Medicaid? 

Ms. CORLETTE. It does. But also some are just simply ineligible. 

They may be undocumented or they have other sources of coverage. 

But among those who are eligible for the marketplaces and 

would benefit the most from the financial assistance that is available, a recent study found that many live in families receiving 

EITC or other public benefits, such as SNAP. Many also have a 

school-age child in the home. These are avenues that the Federal 

Government could take advantage of to do targeted outreach, to 

educate these individuals not only about the coverage that is available, but also the financial assistance that can help make that coverage affordable. 

Mr. GREEN. OK. One of the issues I hear, and I heard it just this 

morning with a group of insurers, can you discuss the benefits of 

the medical loss ratio? Of course, let me explain my background. 

I managed a small business, and at one time it was hard to even 

get companies to offer us insurance for our small business. 

But the medical loss ratio, the 80 percent of that premium has 

to go to health care. And, to me, most employers would say we are 

getting a return on our money. And could you talk about the importance of that benefit? 

Ms. CORLETTE. Yes. Sure. The medical loss ratio basically says 

that of the premiums a health insurance company collects, 80 percent, or in the case of a large group 85 percent, has to go back towards the benefits that they are supposed to be covering. So it is 

an important consumer protection. Before this standard went into 

effect, you would see in the market companies with loss ratios of 

47 

50 percent, 60 percent. That means the company was pocketing 

close to half of the premium that they were collecting from the consumer or the small business. So the medical loss ratio is really just 

designed to bring more value to the purchaser. 

Mr. GREEN. Thank you, Mr. Chairman. I will yield back my time. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the vice chair of the sub, Mr. Guthrie, 5 minutes 

for questions. 

Mr. GUTHRIE. Thank you. 

And these questions are for Mr. Roy. We have instances of people 

purchasing health insurance under the ACA when they are sick, 

and it distorts the market for other people participating. Patients 

need to get access to care. That is important. But we also want patients to keep their coverage. There have been various ideas put 

forward about the best ways to help patients keep care and give 

market stability. 

Medicare part D incentivizes participation by using late enrollment assessments. Patients are encouraged to join Medicare part 

D during their initial enrollment period because if they choose not 

to, their premium will be slightly higher. Do you believe this same 

model would be useful in the private health insurance market? 

Mr. ROY. Yes, Mr. Guthrie, I think that that is one of the points 

I was making in my prepared remarks where I discussed the fact 

that we don’t need an individual mandate to have a system that 

works to protect people who have preexisting conditions, expand access, and be nondiscriminatory towards the healthy, while also discouraging people from dropping in and out of the system just when 

they are sick. 

If you have late enrollment penalties and other techniques, such 

as a tight open enrollment period, perhaps longer insurance contracts, those are all options on the table that help incentivize people voluntarily to be involved in their insurance continuously. 

Mr. GUTHRIE. Similarly, and you have covered some of this, but 

according to CMS, the part D late enrollment assessment is 1 percent of the national base beneficiary premium times the number of 

full, uncovered months a beneficiary did not have part D or credible coverage. 

I think we can agree that Medicare part D is one of the most successful Federal healthcare programs. Could this reasonable guardrail also help improve private care programs? 

Mr. ROY. Absolutely. So one of the reasons why that particular 

provision is useful is that it modulates the late enrollment penalty 

based on how far away you are from the open enrollment period. 

So that way if you are really trying to game the system or the economic equivalent of that, the penalty is larger in that way. The 

penalty is well calibrated to the severity of how much you are going 

in and out of the system. So it makes the penalty as light as it 

needs to be but as effective as it needs to be to discourage that 

dropping in and out of the system. 

Mr. GUTHRIE. OK. And then another question. Another market 

lever to discourage people from only buying health care when they 

are sick is waiting periods. Let’s say a patient gets a tough diagnosis and they rush to buy health care for the first time. Could a 

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tive encourage people to enter private markets while they are 

healthy instead of waiting until they are sick? 

Mr. ROY. Yes, it could. And, again, one thing that would tie in 

with that is longer insurance contracts. So if you have an open enrollment period every year, you still create a lot of incentive for adverse election because people can change plans every year based on 

their health status. But if they have the option to, say, buy a 2- 

year health insurance plan or a 5-year health insurance plan at a 

discount relative to what buying five 1-year plans would cost, you 

can incentivize people again to stay in a long-term relationship 

with their insurer where the insurer then also has an economic incentive to work with that patient over time to do things like 

wellness and compliance. 

Because the challenge is, if you have a 1-year insurance contract, 

then the insurer worries, well, if I invest a lot of time making this 

patient healthy, what if he signs up for somebody else’s plan next 

year? Then I don’t really get the benefit economically from having 

helped this patient. 

So encouraging insurers to have long-term relationships with 

their patients and long-term contracts with their patients would do 

a lot to align the incentives of the patient and the insurer. 

Mr. GUTHRIE. Thank you. I appreciate the answers to those questions. 

And I yield back my time. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the gentleman, Dr. Schrader, 5 minutes for questions. 

Mr. SCHRADER. Thank you, Mr. Chairman. 

I appreciate the panel. It is nice to be talking about something 

other than full repeal of the Affordable Care Act and thoughtful 

discussions out here. So I like that. 

I guess the first opening question would be, I would be curious, 

actually the panel itself, Mr. Gottlieb in particular perhaps, I know 

the age thing has been talked about, we talked about that way 

back when we did the ACA, but what about lifestyle adjustment for 

premiums? That was something we considered very strongly early 

on. I know the President was interested in that. There is smoking, 

exercise, bunch of different variables. Sometimes hard to quantify, 

and we don’t want to be discriminatory as we do that. 

Now, that seems to me another thoughtful way, to be a good incentive, quality health care is a good result. Is there any discussion 

on that in the academic circles at this point? 

Dr. GOTTLIEB. Yes, a lot of discussion. I think a lot of the approaches we are talking about here today aren’t just, frankly, prohibited by the law, they are prohibited by the regulation. 

The challenge isn’t just some of the prescriptive regulation in the 

law itself, but, frankly, the way the regulations have been written 

by CMS I think have been overly prescriptive in areas that would 

deem certain things like what you are suggesting to be discriminatory. 

Ultimately in the plan that we put forward with the American 

Enterprise Institute, we move towards a system where you could 

have subsidies based as a fixed percentage of the cost of the premiums, and you would ultimately cede back to the states more 

49 

flexibility to allow plans to adjust premiums on a whole host of 

things, such as age, geography, maybe even some measure of preexisting condition. And then people, individuals, would get a subsidy that would be a fixed percentage component of that. And then 

you could go in if you wanted to as a matter of Federal law and 

increase the subsidies for certain individuals, including perhaps 

subsidizing certain kinds of risk in the marketplace and certain 

kinds of individuals with preexisting conditions. 

But we would envision a more flexible framework that would 

allow for what you are suggesting. I will tell you I think the way 

the regulations have been written, in a very prescriptive manner, 

there is very little that wouldn’t be deemed discriminatory. 

Mr. SCHRADER. Ms. Corlette, comment on that? 

Ms. CORLETTE. Yes. Sure. 

So of course the Affordable Care Act already does include rating 

provisions that allow insurers to charge smokers or people who use 

tobacco up to 50 percent more than somebody who doesn’t. It also 

allows employers to charge up to 30 percent more for people who 

don’t meet certain wellness targets. 

I would say that the research that is out there to date on that 

suggests that linking achievement of a certain health target or 

changing a behavior, linking that to an increase in premium or a 

higher deductible is actually not very effective in changing behavior. What researchers found is that people are much more responsive to sort of more discrete short-term incentives. You know, 

maybe it is a gift card or a discount at the gym or something like 

that. Those tend to be much more effective strategies for getting 

people to lose weight or change other behaviors. 

We would be happy to discuss other alternatives with you. 

Mr. SCHRADER. Mr. Roy, a comment? 

Mr. ROY. Yes. I am less enamored of lifestyle-based health insurance pricing, and the reason why is that it is hard to enforce. Are 

you actually going to check and see, is the insurer supposed to 

check to see whether the patient is going to the gym one time a 

week versus three times a week, or smoking one pack a day versus 

half a pack a day? 

I believe that those pricing mechanisms are very difficult to do 

in a rational way, and I think it is simpler to have a system where 

you have a means-tested schedule and an age-based schedule. You 

can publish it in a table, in a book, and people can know every year 

after they file their taxes exactly what tax credit they qualify for, 

and you make it very simple for people, very transparent for people, and that eliminates the waste, fraud, and abuse that we are 

seeing in the way the subsidies are administered now in the exchanges. 

Mr. SCHRADER. Ms. Corlette, there has been a lot of discussion 

about the special enrollment periods and people taking advantage 

of that. CMS recently came out with some rules. Do you think 

those rules get to at least a bunch of what the concerns have been 

here recently? 

Ms. CORLETTE. Yes, I think they do. Although I would just say 

I think the solution is not fewer people taking advantage of SEPs. 

It is actually we need more people taking advantage of SEPs. One 

50 

of the problems is that only 15 percent of people eligible for these 

special enrollment periods are actually taking advantage of them. 

And there is nothing about the triggering events, right, that 

would suggest this should be a sicker population. It is people having a baby or getting married or leaving a job. That happens to 

healthy people. It happens to sick people. But it is the sicker people 

that are motivated, right, to find out about the opportunity. 

So I do think that, coupled with documentation requirements, 

which I think are perfectly legitimate to ask people to verify what 

is going on in their lives, but we also need to be doing more aggressive outreach and education to all people who are eligible for SEPs. 

Mr. SCHRADER. I yield back. Thank you, Mr. Chair. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the gentleman from Missouri, Mr. Long, 5 minutes for questions. 

Mr. LONG. Thank you, Mr. Chairman. 

Mr. Gottlieb, last week I had a manufacturing tour in my district 

back home and saw several manufacturing facilities, which is vital 

to my part of the country. And we had a little shoot-off with the 

Democrats yesterday, Republicans against Democrats shooting 

skeet and trap. And one of the things I saw was a clay pigeon mold 

that I have never seen before where a lot of those are made to mold 

the clay pigeons right in my district. 

Another thing that I saw was DMP, Digital Monitoring Products 

Company, bank-monitoring products. It is a 41-year old company. 

A 41-year old company. They are adding 74,000 square feet and 

doubling the size of their engineering department. So manufacturing is really, really important in my area. 

Another company that I went to see has done all of the work on 

the new African History Museum that they are putting up here on 

Washington, on the windows and all the structure there. They have 

also done all the work up here on the Native American Museum. 

They are doing one of the largest projects ever up in Manhattan 

right now. All the tall glass you will see on all those big new buildings going up in that section are coming out of my district. 

So manufacturing is huge in my district. So I will preface my remarks with that. 

Today large companies are able to use the size of their workforce 

to negotiate better rates with healthcare plans. Many healthcare 

thought leaders have suggested that individuals and small businesses should have the same benefit. In fact, before the enactment 

of the Affordable Care Act reforms, the Missouri Association of 

Manufacturers was able to operate two health consortiums providing quality health care to over 2,500 lives spread among 81 

businesses, large and small, just as those that I described a minute 

ago on my tour last week. 

On this issue of pooling, do you think that allowing individuals 

to join together to increase their purchasing authority would help 

lower costs? 

Dr. GOTTLIEB. I think I would favor all kinds of pooling arrangements, including allowing small business to band together, including the concept of association health plans. There is nothing inherently wrong with pooling on the basis of state-based exchanges. I 

51 

wouldn’t want to see a marketplace where that is the only way that 

people can pool together. 

Just as an aside—— 

Mr. LONG. Now, what do you mean, the only way they can pool 

together? 

Dr. GOTTLIEB. Well, right now, the way the law is trying to force 

the market, the only way you can pool individuals is either to selfinsure or to go on the state-based exchanges. The kinds of construct you are talking about or the kinds of construct that the 

chairman introduced with respect to association health plans 

wouldn’t be allowable in today’s marketplace. There are really only 

two places to pool risk outside of government programs: it is on the 

state-based exchanges or if you self-insure. 

There is now a secular shift toward self-insurance by small businesses who previously probably were too small to self-insure but 

are self-insuring to try to get out from some of the mandates and 

the regulation. I think one thing that should concern this committee and concern all of us is we are seeing efforts on the part 

of CMS now to apply more of their regulation to the self-insured 

businesses. And so you are seeing CMS regulation in certain instances potentially supplant ERISA law. 

Mr. LONG. Well, when you say small companies can self-insure, 

pool, I guess they pool within themselves. But I am talking about 

all these manufacturers in Missouri were pooling among other 

manufacturers to come up with very good rates for their people. 

Would the concept of individual health pools, or IHPs, make 

rates more competitive, in your opinion? 

Dr. GOTTLIEB. Right. Absolutely. What it would do is it would 

allow small businesses to band together and negotiate for insurance contracts as self-insured businesses and put them on par with 

a large business. A large business that employs tens of thousands 

of people is getting better rates from the insurance companies who 

administer their products. It would allow self-insured small businesses to do the same thing. 

Mr. LONG. So just like corporations and labor unions do, you 

think that they should be able to pool together? 

Dr. GOTTLIEB. Yes. And just like small businesses are able to 

pool together to purchase office supplies in the marketplace and do 

other things like that, yes. 

Mr. LONG. And finally, could these individual and association 

plans lead to more patients getting health care? 

Mr. GOTTLIEB. I think that they would lead to more businesses 

being willing to self-insure. We are already seeing that in the marketplace, that businesses that are right on the cusp of having 

enough employees in order to reliably self-insure and take that actuarial risk are doing it. I think it would lead to more businesses 

being willing to do that. 

We are also seeing innovation in companies that are forming to 

help very small businesses self-insure. So if you create the mechanism you are suggesting, it is going to just expand the ability of 

small businesses to do that. 

Mr. LONG. OK. Thank you. 

I think for the first time in 6 years I have time to yield back. 

52 

Mr. PITTS. The chair recognizes the gentlelady from California, 

Mrs. Capps, 5 minutes for questions. 

Mrs. CAPPS. Thank you very much, Mr. Chairman. I appreciate 

our witnesses being here today for your testimony. 

And I would like to just bring into this conversation more of the 

California experience with health reform. As we have seen time 

and time again, our healthcare markets hinge on the buy end and 

efforts at the State level. The network has a direct influence on the 

patient experience in finding and getting quality affordable health 

insurance. 

As of June 2015, 1.3 million people in California are actively enrolled in health insurance, and our uninsured rate has been cut in 

half. In a time where there is a lot of rhetoric about how we must 

deregulate our health system, California has used smart regulation—this is my opinion, but they believe it too—to take a solutions-based approach to health reform. Our state exchange has required health insurance companies to build consumer tool that encourage participation and transparency, and such tools help with 

outreach by letting consumers compare plans in an apples-to-apples 

way by looking at out-of-pocket costs and quality. 

So in using all the tools at our disposal to regulate the market 

and be active purchasers of health care, California has emerged as 

the leader in this space and has succeeded in providing important 

healthcare services to citizens. 

Ms. Corlette, how do these state tools and others protect consumers? 

Ms. CORLETTE. Yes, absolutely. So California is leading the way 

on many fronts, and I think is showing many of the other statebased marketplaces how to do things that can really help consumers have a better shopping experience. 

So, for example, one thing California does is require the benefit 

designs to be standardized, and that is good for two reasons. One, 

it really helps consumers make apples-to-apples comparison among 

the plans, and allows them to focus on price and network and really important differentiators between the carriers. The second thing 

it does is it really limits the ability of the insurers to design discriminatory packages that can discourage enrollment by sicker people. So, for example, we saw in other States where insurers were 

putting all of the HIV–AIDS drugs on the very highest specialty 

tier, including generics. Well, that was clearly designed to try to 

discourage those individuals from enrolling. 

So standardized designs are used pretty commonly in private exchanges, like Ayon and Mercer and Towers Watson, they require 

benefit designs to be standardized because it helps consumers 

make those comparisons. So California is doing that, and I think 

they have found it very useful. 

Mrs. CAPPS. Not that we are doing everything perfect in California, that is for sure. But is there a way that we can—and I will 

put it this way—we need to learn in California from other states, 

and the successes that they are having. Are there ways other states 

could adopt these same practices for states who don’t take these 

steps? What are their consumers faced with? And should the Federal exchange be doing anything about this? This is a lot to dump 

on you in one question, but if you don’t mind. 

53 

Ms. CORLETTE. Yes, sure. So a number of other states are looking 

at, or have standardized benefit designs. They have also been implementing things like out-of-pocket costs calculators that not only 

tell you what your premium is going to be, but if you are high risk 

or low risk or medium risk what your total out-of-pocket spend 

might be during the year to come. And that is really important for 

consumers to be able to compare plans. 

Another thing that the Federal marketplace is going to be bringing online, which I think could be useful, goes to the issue of network design and helping consumers discern whether or not a network is narrow, medium, or broad, because right now there is no 

easy way to tell. And many consumers are willing to make the 

trade-off between price and the narrow network, but you need to 

at least know what you are looking at, and so those kinds of tools 

can really help. 

Mrs. CAPPS. I still have a minute. And that question is a little 

bit open-ended. Would either Mr. Roy or Dr. Gottlieb, would you 

like to respond to that particular question? 

Mr. ROY. Sure, I am happy to. Thank you. I have a bit of a different view about the California experience. California actually had 

the most robust nongroup health insurance market in the country 

prior to the ACA, where individuals enjoyed a broad range of 

choices and diversity in the kinds of plans they could purchase. The 

reason why the uninsurance rate has gone down in California is 

not because of the regulations that have made health insurance in 

California cost more than double in many cases what it cost before. 

The reason is the subsidies, which, of course, help people afford 

these much higher premiums. 

So I think it is great that there is financial assistance for the uninsured to purchase health insurance, but I think that the regulatory scheme that California imposes has actually dramatically increased the cost of health insurance. As an example, I can give you 

specifically, in Kaiser, a plan in Sacramento, that exactly the same 

plan with exactly the same network, exactly the same cost-sharing 

provision, exactly the same actuarial value, costs double as a result 

of the ACA’s regulations than it did before. So that is a big problem 

in California. And, yes, people at below 200 percent of the Federal 

poverty level are getting a lot of financial assistance. But as you 

go up that income scale, the increased premiums are pricing a lot 

of people out of the market, and that is why enrollment in the exchanges nationally and in California has fallen well short of expectations. 

Mrs. CAPPS. Well, I am going to have another round since I started that, Mr. Chairman. But I will yield back my time. 

Mr. PITTS. The chair thanks the gentlelady and now recognize 

the gentlelady from North Carolina, Ms. Ellmers, for 5 minutes of 

questions. 

Mr. ELLMERS. Thank you, Mr. Chairman. 

And my questions are for you, Dr. Gottlieb. As you know, plans 

are starting to exit the Federal marketplace. Namely, one that has 

been highly publicized is United Health Group. United will be pulling out of 26 States because they project a $650 million loss this 

year. Some supporters of the status quo have tried to downplay 

this, arguing that United was not a major player in the Federal exVerDate Nov 24 2008 11:27 Sep 07, 2017 Jkt 037690 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-143 CHRIS
54 

changes. But their departure from the marketplace has the potential to significantly limit competition in some markets where patients may only have two, or maybe even one option for plans to 

purchase. 

So my question is, should consumer advocates be concerned 

about this trend, or as this is happening in these markets, and will 

it limit choice based on what is left in the market? 

Dr. GOTTLIEB. And so, I don’t think United’s exit was trivial, because United has the potential of dramatically expanding its footprint. They lost over, I think, $1.2 billion over 2 years, and they 

exit the market, and it is not growing its footprint either. I think 

is what even more concerning is the Blues who have dominated the 

market to date are also experiencing losses, and we are seeing 

some signals that some of the Blues’ plans may exit. 

The observation that is worth making in my view is that as these 

plans do exit the market, the plans that are growing their footprint 

in the market, and actually offering the best price, and quite frankly, are the Medicaid plans. And I think that is because this is becoming a much more Medicaid-like benefit, where plans are competing on network design and formulated coverage alone and trying 

to cheapen the benefit, and the plans with the experience in the 

market of offering cheap benefits, cheap enough to offset the high 

costs of the regulation in this scheme are the Medicaid carriers, 

and they are, in fact, the ones that are growing their footprint 

quite dramatically. I think Molina doubled their footprint in the 

market. Centene came close to that this year, and they are also, 

frankly, making money, too. The few plans that are making money 

are the Medicaid plans. 

Mr. ELLMERS. Thank you for—that is actually along my line of 

questioning. And you point out the Blue Cross, and that is going 

to be significant in North Carolina, where we do only have a couple 

of insurers participating. And Blue Cross has announced that they 

will be. I am very concerned about this, because we have got to do 

everything we can for these patients to get good healthcare coverage, and they are offering the coverage that they have been satisfied with. They may have had to have cancelled whatever plan they 

had before in order to get on it, but they have become accustomed 

to it, and now, even that is ending. 

So that is my line of questioning here. Again, pointing out that 

Centene and their Medicaid-like plan said they would be likely 

turning a profit in the exchanges. 

In fact, they say about 90 percent of Centene’s exchange enrollees are subsidy eligible and have incomes at the level that leaves 

them moving in and out of Medicaid. So United, who is offering 

broader networks and better coverage, has dropped out of 26 

States, while Centene, who offers narrower networks and higher 

deductibles, has projected that they will be profiting in the exchanges. 

So there, again,—do you see this as a trend, or, in your opinion, 

is this a trend? And does this not demonstrate that basically, as 

I would put it, this current law is almost a race to the bottom for 

patient coverage? 

Dr. GOTTLIEB. Well, I think it is a race to a Medicaid-like benefit. 

Not to oversimplify, but I think the issue is that all the traditional 

55 

tools—and I agree with—that it is a problem. All the traditional 

tools that insurers use to try to manage costs have largely been 

regulated away. Not all but many of them. And the only way that 

insurers can manage costs in this exchange market is to cheapen 

the benefit. The only way to cheapen the benefit is either you own 

the doctors and you try to regulate what they do very closely, or 

you network with very few doctors, very cheap doctors, doctors who 

don’t see a lot of patients in the community, and you offer a closed 

formulary and you start tightening up your formulary design, and 

the plans with the experience doing that and the plans that have 

the cheap networks are the Medicaid carriers, and that is why we 

are going to see them continue to grow their footprint. 

Mr. ELLMERS. I have only got a limited time left. So, basically, 

what this is going to do is limit care, limit access to care? 

Dr. GOTTLIEB. And limit choice of plans, unfortunately. And I 

think the real thing that should concern individuals are when the 

Blues plans are experiencing losses and start pulling out of this 

market. 

I raised this issue with folks in the administration about the 

Medicaid carriers growing their footprint, and the response was, 

well, they haven’t really dominated the exchanges. It has been the 

Blues plans that have dominated the exchanges. And that is true, 

but we are seeing a lot of pain on the Blues plan as well. And when 

they start dropping out, I think that really is going to signal a 

downward spiral here. 

Mr. ELLMERS. Thank you. 

And I yield back the remainder of my time. 

Mr. PITTS. The chair thanks the gentlelady. 

I want to apologize to the gentlelady from California, Ms. Matsui. 

I missed you in the queue. You were here. You should have been 

recognized earlier. 

The chair recognizes Ms. Matsui for 5 minutes for questioning. 

Ms. MATSUI. Thank you, Mr. Chairman. 

And I want to thank the witnesses for coming here today. 

The passage of the Affordable Care Act eliminated exclusion of 

over 129 million Americans living with preexisting conditions from 

receiving affordable health insurance. These preexisting conditions 

include not only rare diseases, but also common diseases, like asthma or diabetes. 

Ms. Corlette, can you talk about the experience of those with preexisting conditions attempting to purchase insurance in individual 

markets before the ACA? 

Ms. CORLETTE. Sure. Absolutely. I will just say that the individual market was a very inhospitable place before the ACA. People with preexisting conditions were frequently denied access, up to 

40 percent were denied outright a policy. It was frequently 

unaffordable, because rating factors related to their health status 

or gender or age, could sometimes be as much as nine times the 

amount of the unhealthy person. They found it often unaffordable 

to get a plan, and then that coverage was what we used to call 

Swiss cheese coverage; preexisting conditions were often excluded. 

So, for example, a breast cancer survivor would be told that no 

oncology services would be covered under the plan. Or if you had 

incidences of asthma, you would be told that no upper respiratory 

56 

conditions would ever be covered under the plan. Those are the 

kinds of things that are now thankfully in the past. 

Ms. MATSUI. Thank you. I also want to consider this, because 

protection against preexisting condition discrimination is important 

for the over 30 million individuals in this country who suffer from 

rare or serious chronic diseases, and they are in another situation 

too, which is even more difficult. These diseases can be debilitating, 

not only to the patient’s health, but also to a family’s financial stability, especially when diseases inhibit the ability of a patient to 

work. Patients sometimes need to rely on the goodwill of thirdparty nonprofit charity organizations to help them access the care 

they need. We need to preserve the ability of patients to rely on 

third-party payments from charities. And I am working with CMS 

to do that. 

The ACA has been very good for millions and millions of Americans, and we are looking to see how we might improve that, too. 

And this is an area we are looking at because of the serious financial instability of the patient’s family. So I do hope that we can 

work with you as we move forward on that. And thank you. 

And I yield back the rest of my time. 

Mr. PITTS. The chair thanks the gentlelady and now recognize 

the gentleman from New Jersey, Mr. Lance, 5 minutes for questions. 

Mr. LANCE. Thank you very much, and good morning to the 

panel. 

I am concerned about the fact that exchange participants, based 

upon their 2015 plans, did not necessarily continue for 2016. A recent study, as I understand it, has found that only one-third of exchange participants kept their plan year to year. And I think this 

reveals significant market instability. 

Could the panel comment on that? 

Mr. ROY. Yes. So I would say it is not entirely about market instability. If you are going to have a 1-year insurance contract, people are free to shop year over year for the plan that is the best plan 

for their needs, and it might be that the prices have evolved in a 

different way. Just like you might not fly the same airline next 

week as you did last week, you might have a different plan next 

year than you did this year. 

So much of this is quite natural. But I do think that instability 

is important insofar as, again, the insurance company does not 

reap the economic reward from making you healthy over the long 

term if you are switching plans year over year over year. 

So maybe it is good for some people to have plans where they 

switch year over year, because that helps create the price discipline, that encourages insurers to compete for your business and 

be held accountability for the premiums they charge, but it would 

be nice for there to be an option in the individual market for people 

to shop for plans with longer time horizons so that, again, for a discount, perhaps those insurers would say, ‘‘Hey, if you sign up with 

me for 5 years, your insurance would cost 20 percent less, but we 

will be able to work together to make sure you stay healthy in the 

long run.’’ 

Mr. LANCE. Would anyone else in the panel like to discuss this? 

Yes, Ms. Corlette. 

57 

Ms. CORLETTE. Yes. Sure. I think the factor to keep in mind is 

historically the individual market was called the residual market, 

and that is simply because the primary source of coverage for most 

people under 65 is through their employer. 

Mr. LANCE. Yes. 

Ms. CORLETTE. And, certainly, for people of lower income, they 

may come in and out of Medicaid. So one of the reasons we are seeing a lot of transition in the marketplaces is because people might 

be gaining coverage because they get a job, or because they dip 

below the poverty line and so they are then eligible for Medicaid. 

So that is just an important factor to keep in mind when you think 

about these marketplaces. 

Mr. LANCE. Thank you. 

Doctor. 

Dr. GOTTLIEB. I think your observation reflects the fact that the 

plans that experience the largest enrollment are the ones that increase their premiums the most in a subsequent year, because they 

are the ones that experience the biggest losses. And that is why 

when we are looking at the premium increases over the course of 

this year, we really should enrollment-adjust them, and think 

about the premium increases on enrollment adjustment basis, because it is going to be the case that the plans that take the biggest 

premium increases will be the ones that have the biggest enrollment, and then that is going to cause a subsequent churn that you 

are talking about in the subsequent years. 

I think the other trend that is worth watching is that this is becoming a market that is increasingly narrow to a very narrow income demographic, and that is people who are eligible for the costsharing subsidies because of the high costs. We talk about the premiums and the subsidies for the premiums, but the out-of-pocket 

costs are very, very high in a lot of these plans. 

And so, the only people for whom this is economically attractive, 

if you will, increasingly are going to be those who fall around 200 

percent of Federal poverty level who qualify for the cost-sharing 

subsidies. And I think we talked at the outset about there hasn’t 

been, sort of, the dumping, if you will, from the employer market 

into the exchanges. I think we are going to start to see that, start 

to see people who work for large employers who fall within that income range find themselves in the exchanges, and lose their employer-provided coverage, and it could, potentially, make the American health care less egalitarian overall. 

Mr. LANCE. Thank you. And would anyone else on the panel like 

to comment on what the doctor has just said regarding the narrowed market? 

Mr. ROY. Yes. One thing I might add, too, is that we have been 

talking a lot about preexisting conditions, and there’s been an enormous amount of disruption of the individual market for health insurance because of the claim that we needed to do all the disruption to protect people against preexisting conditions. And that is 

not actually true. It turns out, actually, the CBO did a study where 

they asked the long-term uninsured why they didn’t have coverage. 

Seventy-one percent said it was because the insurance cost too 

much, the premiums were too high. Only 3.5 percent said that beVerDate Nov 24 2008 11:27 Sep 07, 2017 Jkt 037690 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-143 CHRIS
58 

cause of a preexisting condition or other health status-related 

issues were denying them coverage. 

We also have the evidence from the Affordable Care Act’s own 

preexisting condition insurance program, a high-risk pool that was 

designed to be a bridge between the enactment of the ACA and 

2014, when the guaranteed issued regulations came into effect. 

That provision allowed anyone who could demonstrate that they 

had been denied coverage by an insurer because of a preexisting 

condition, anyone, any person who could prove that could sign up 

for this program. Only 250,000 people in the entire country signed 

up for this program. And we disrupted health insurance for 300 

million people, allegedly, because we needed to fix health insurance 

for these 250,000. 

So it is really important to understand that we should address 

the problem of preexisting conditions, but there are a lot more efficient ways to do so that don’t disrupt coverage for the people who 

had it under the old system. 

Mr. LANCE. Thank you. 

My time has expired. 

Mr. PITTS. The chair thanks the gentleman. I now recognize the 

gentleman from Maryland, Mr. Sarbanes, 5 minutes for questions. 

Mr. SARBANES. Thank you, Mr. Chairman. Thanks to the panel. 

Just on that last point, there is a distinction between people that 

were being outright banned or denied coverage based on a preexisting condition, versus people whose premiums were being adjusted significantly or a lot higher based on the fact that they had 

a preexisting condition. So the observation by 90-something percent 

that it was the cost that was the barrier to them could still be 

linked to the preexisting condition situation, I would imagine, in a 

lot of cases. 

The question I have, and I will start with you, Ms. Corlette, is 

I have heard some increasing discussion about the high-deductible 

plans and the impact that is having on the affordability, but also 

a discussion of how there is a wide variation in the kinds of benefits or services or products, for example, drugs, that are exempted 

from the deductible, and how that can affect affordability and behavior and access and so forth. 

And I think, for example, California is an example—is a state 

where they have been pretty proactive in looking at that issue of 

where the exemption should be for certain kinds of services to try 

to make the coverage more affordable and more useful, frankly. 

So could you start a discussion among the panel about that deductible issue, because I think it has implications potentially for 

some improvements that we could do with guidance in that area? 

Ms. CORLETTE. Yes. I am so glad you asked that question. So two 

quick points about deductibles. One is I find it ironic that a lot of 

people who right now are complaining about the high deductibles 

on the marketplaces are the same people who have been calling for 

more high deductible health plans generally. 

The second thing is, we have to think about where we were before and where we are today. Pre-ACA, deductibles were as high 

as $10-, $15,000 sometimes. So the financial protection that exists 

in the marketplace right now is way better than it was previous 

to the ACA. 

59 

But to your point, when you tell a lower income family that they 

have a $5- or $6,000 deductible, it doesn’t matter, right? That is 

still a huge amount of money for them to lay out before they can 

get healthcare services. 

There are a couple of things that are really helpful and important. Number one is, of course, the ACA provides first dollar coverage for preventive services and important screening. But, interestingly, California is a State that is doing this and other States 

are looking at it as well, is encouraging, or in some cases, requiring 

insurers to cover important primary care services, generic drugs, 

some urgent care before somebody has to pay up the deductible. So 

that allows a consumer to get more upfront value than they otherwise would, and I think that is an innovation that we should be 

looking at more broadly. 

Mr. SARBANES. Anybody else? 

Mr. LANCE. Yes. So, Ms. Corlette thought it was curious that 

people might critique the high deductible in the ACA. So let me try 

to explain why people do that. 

The problem is that, in theory, high deductibles are good, because if you have the option of a low deductible and a higher premium and a high deductible and a lower premium, some people, 

naturally, might want a lower premium and a high deductible. If 

people are truly trying to seek protection from bankruptcy due to 

medical bills, the most affordable way to do that is through a highdeductible plan combined with a health savings account. 

The problem with the ACA is the deductibles are higher, and the 

premiums are higher, too. So people are paying 50 percent more for 

their monthly premium and the deductible is 2,000, $3,000 higher 

than it was before because of all the regulations and mandates in 

terms of how those insurance products have to be designed. And 

this is why the regulatory scheme of the ACA has been a major 

focus of criticism, because it is directly responsible for the fact that 

people are not only just paying higher deductibles, they are also 

paying higher premiums. 

Dr. GOTTLIEB. So I will just comment. I think the idea of a highdeductible plan, some sort of a conservative theology, if you will, 

was that the high deductible was tied to a lot of consumer selection 

on the more routine care. And here you have a regulatory scheme 

that mandates a lot of first dollar coverage for ordinary, routine 

care, but still is coupled to a high deductible, and that is not really 

a high-deductible consumer-driven plan. And what is happening is 

because the insurers have to cover first dollar of a lot of the routine 

stuff, and they can’t take premium increases; they can’t offset those 

costs in other ways, they are offsetting it by, in my view, narrowing 

the coverage for the catastrophic fees. Exactly a place we want the 

most generous coverage. And that is being coupled—as you mentioned, drug formularies that is being coupled, for example, and it 

is manifesting in the form of closed drug formularies, where you 

have very narrow lists of drugs on formulary, and all the drugs 

that aren’t on the formulary aren’t covered at all. And what consumers spend out of pocket for those medicines doesn’t count 

against your out-of-pocket maximums, so their deductibles are completely on their own. 

60 

And I would say, I think all the silver plans on the Affordable 

Care Act are closed drug formularies. I have gone through and I 

have looked at 30, 40 plans, and published this data, and they were 

all closed plans, and I just assume that it is almost all the silver 

plans are closed formularies. That is really a new development in 

the marketplace. We never saw closed formularies used so predominantly. The only place we really saw that was in Medicare Part D 

and Medicare Part D coupled it with a lot of regulations and modeled formulary protected classes. 

And I will just sum up by saying I don’t think the health plans 

are doing anything wrong. I think they are taking flexibility where 

they still have it. A lot of the flexibility that they have to or they 

have traditionally used to try to manage costs have been taken 

away from them, and the few places that it is left, they are exercising it. 

Mr. SARBANES. Thank you. 

Mr. PITTS. The chair thanks the gentleman, and recognize the 

gentleman, Dr. Murphy, 5 minutes for questions. 

Mr. MURPHY. Thank you, Mr. Chairman. 

It is a sad thing to me when I look at, as we reflect on this committee, and also the subcommittee on Oversight and Investigations 

has looked over the last few years of the kind of spending we have 

had on the Affordable Care Act. We have had it for advertising, 

Web sites that didn’t work. I think Oregon spent a couple of hundred million and finally, they decided since they didn’t sign anybody up and it was filled with political corruption; it wasn’t going 

to work. We have seen half the co-ops fail, administration costs. 

Secretary Sebelius went back to the insurance companies and said, 

Hey, we need some more money from you to donate to keep it 

going. And none of that money went for even a single Band-Aid. 

Nothing helped there. So we have got to find a different approach 

on how we are handling health care. 

Now, one of the things I want to talk about are the high-risk 

pools, and particularly, invisible risk pools. I think, Mr. Roy, you 

have talked about these things. I want to see if you can elaborate. 

So are high-risk pools still today a fair pathway for helping to cover 

some of our sickest friends and neighbors? 

Mr. ROY. They can be, but they face a lot of limitations. And I 

think that to the degree that we have talked about high-risk pools, 

we have to understand the risks of high-risk pools. So, for example, 

the AEI proposal proposes giving States funding for high-risk pools 

as a bridge for those who are very sick and don’t get coverage for 

the traditional market. The challenge is that once States, State 

governments, just like State exchanges can be messed up, if State 

governments are running high-risk pools, they have incentives, an 

incentive to overpromise and underdeliver. They say, Oh, we are 

going to expand this high-risk pool to everyone because the politicians will have to pay the bill for that and the voters will have to 

pay for—— 

Mr. MURPHY. I understand. 

Mr. ROY [continuing]. Or 20 years down the road. So—— 

Mr. MURPHY. So where would they pay that, on the back end, 

then. 

61 

Mr. ROY. Well, yes. So if you sign people up, but most of the 

health costs happen 10 years down the road as those patients age, 

and have higher medical costs as a natural combination of their 

aging and their health care. Once the government is actually determining the price of a risk, a lot of things can go wrong. I would 

argue it is actually simpler to preserve guaranteed issue, but get 

rid of the distorting and discriminatory regulations in the ACA exchanges that make guaranteed issue unaffordable. So you can actually preserve guaranteed issue in a very simple way that doesn’t 

require the use of high-risk pools, have everyone in the same insurance market, and that way, the people who are high risk, the people with diabetes, people with chronic conditions, have a broader 

choice of health insurance plans than they would have on the highrisk pool. 

Mr. MURPHY. Dr. Gottlieb, do you agree with that approach? 

Dr. GOTTLIEB. I think we talk about high-risk pools as an interim 

step. My view is that I think with proper risk adjustment, that 

would be able to be done prospectively, and a subsidy structure, 

that you allow some adjustment for risk, you can achieve what you 

are aiming to achieve with high-risk pool and help underwrite the 

increased risk of certain individuals with chronic conditions much 

more effectively in a viable pool. 

Mr. MURPHY. Let me ask this, too, then: As someone who has 

identified, so we know that people who are healthy are trying to 

avoid buying insurance, and then they start to get sick and they 

want to buy insurance, the same as people who have cars. They 

don’t want to buy insurance until they get in an accident. But what 

happens here also is when you look at the incredible cost if these 

are not managed. So Medicaid, 55 percent of Medicaid spending 

goes to 5 percent of the population. And according to multiple reports, one of them Tom Insel, former head of NIMH, he said virtually all of them have mental illness. And yet, what happens is 

we maintain a system where medical records are kept separate but 

equal, which means you can’t get information and know the higher 

risk, but the person who has a chronic illness and depression, for 

example, doubles, triples, quadruples the cost, if it is not treated. 

And so I am concerned about what we are talking about here is 

just a mechanism to pay for this, but not a mechanism to change 

this. 

And how do we look upon this? If someone is identified then with 

a chronic illness, with a mental illness, they are really beginning 

to coordinate and integrate care, which I think is the absolute key 

to deal with it more cost effectively. 

Mr. Roy, Dr. Gottlieb, and Ms. Corlette, if you could comment on 

that. 

Mr. ROY. Yes, I mean, they are all related, because the reason 

why we don’t have a patient-centered healthcare system in which 

hospitals and doctors and insurance companies would have the incentive to really cater to the patient’s needs in those regards, is because the patient doesn’t control the health care dollars. In every 

other sector of the economy, the consumer controls the dollars, and 

that is why businesses go out of their way to cater to the consumers’ interests and the consumers’ needs. In health care, the 

government controls the dollars. 

62 

Mr. MURPHY. But they are concerned about their own health. I 

think in these cases, if it is not explained to them that you really 

have to coordinate these services together and enforce the position 

that they would be talking to each other across boundaries. 

Mr. ROY. Sure. But insurance companies and healthcare entrepreneurs, healthcare IT companies that integrate their patient 

records across providers, they can provide those services. And part 

of the challenge is that we have a culture in this country of patients who aren’t engaged in their health care and the value of 

their health care because they are not paying for it directly. If they 

are paying for it directly, if they are choosing their own insurance 

plan and paying for care through, like, HSAs and able to shop, yes, 

you are not going to deal with the person who is like the schizophrenic who really doesn’t have the necessary mental capacity and 

there, you need more of a role of the state to help navigate the 

healthcare system for those individuals, but a lot of the inefficiencies with those high utilizers is driven by the fact that they have 

zero economic incentive to save that money. 

Mr. MURPHY. I agree to some extent. But I know I am out of time 

here. But I would also like to opine this, that you are right to some 

extent, but it is also an issue of if it is not managed by these companies, if there is no incentive for those companies to really manage and coordinate that person’s care, then you end with increasing 

costs, the state or Federal Government is just going to pick up. And 

this is where I think we look at ways of financing this program inefficiently, but not really fixing it. 

I know I am out of time, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. Now we are going 

to recognize the gentlelady from Illinois, Ms. Schakowsky, for 5 

minutes of questions. 

Ms. SCHAKOWSKY. Mr. Roy, I don’t even know. I am not going to 

spend my time disagreeing with you, because the idea that if only 

people had more control, that we would dramatically reduce. People 

can’t afford the health care that they need, not that government is 

controlling it. But I am not even going there with you. 

According to a 2014 study done by HHS, the rate review requirement included in ObamaCare saved consumers nearly $1 billion on 

insurance premiums in 2013. However, currently, the Secretary of 

HHS only has the authority to review rate increases, not modify, 

approve, or deny them. Many states have taken the extra step of 

enacting legislation to provide their insurance department with the 

authority to deny or modify unreasonable health insurance premium rates. 

Evidence shows that when insurance regulators have the authority to do so, consumers pay less. I am from a state that does not 

have that authority. In 2013, the Maryland Health Commission 

used such authority to modify the proposed rates for all nine carriers, who submitted plans for the Maryland health connector. The 

commissioner reduced the propose rate increases of all existing 

plans, one by more than 66 percent. And that is why I have introduced the Health Insurance Rate Review Act, which grants the 

Secretary of Health and Human Services the authority to deny or 

modify unreasonable premium rate increases in the states where 

insurance regulators don’t have the authority. 

63 

So, Ms. Corlette, here is the question: Would expanding rate review authority help to control the cost of premiums? 

Ms. CORLETTE. Thank you, Congresswoman, for that question. So 

the evidence is really strong that having an independent reviewer 

of insurers’ rates, proposed rates, the assumptions they are making, the claims they are making about trend and cost, et cetera, is 

a critical consumer protection, and it has saved consumers millions 

of dollars. 

And it is a particularly critical function in areas that there is not 

a lot of competition among insurers. I would say that there are a 

number of states that are doing a really, really good job of this, but 

others where they either lack the authority or the resources to do 

it, and in that case, the Federal Government can be an important 

backstop. 

Ms. SCHAKOWSKY. What states would you cite as examples of 

who is doing a good job? 

Ms. CORLETTE. Who is doing a good job? I think that in Rhode 

Island and Oregon and Washington State, those are a few that 

come to mind immediately. Maine also has a good track record that 

are very proactive in how they are looking at insurers’ claim. 

Ms. SCHAKOWSKY. Let me also ask you this: I also strongly support creating a public option to be offered in the marketplace. We 

discussed this during the development of the Affordable Care Act, 

and we actually passed one in the House. A robust public option 

would increase marketplace competition, lower premiums for consumers, lower the Federal deficit, all this has been documented. It 

is estimated the consumers would save between 5 and 7 percent on 

their premiums through a public option health plan; moreover, the 

Congressional Budget Office previously estimated a public option 

would save $158 billion in Federal spending over a 10-year period. 

I introduced legislation in the Public Option Deficit Reduction Act, 

which would create a publicly administered insurance plan that 

would be available in every marketplace, would be designed to include robust provider networks, and more affordable deductibles. 

So, again, Ms. Corlette, would availability, in your opinion, of a 

public option provide consumers with a more affordable plan and 

help to create more competition in the marketplace? 

Ms. CORLETTE. Yes, I think that the public option could really 

help keep costs lower, not only would it likely have lower administrative costs than a commercial insurance company, but it could 

also use its market power to ring lower prices out of providers. And 

also could be a really important backstop in rural or underserved 

areas where it is hard to get insurers to come in and compete. So 

for those reasons, I think it is definitely worth bringing back on the 

table. 

Ms. SCHAKOWSKY. OK. And I yield back. Thank you. 

Mr. PITTS. The chair thanks the gentlelady, now recognize the 

gentleman from Illinois, Mr. Shimkus, 5 minutes for questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman. This has been a great 

panel, so I appreciate you all coming. I think people know that we 

have a system in place. Some people think it is the best thing since 

sliced bread, some people have concerns. I think everybody believes 

there are changes that could be made. So I think this is going to 

be a start of, hopefully, a lot of discussions. 

64 

There was a section of our citizens that got help, and that was 

the Medicaid expansion for people who didn’t have access to care. 

But I am told all the time, it is never refuted, that people are paying more and getting less coverage now than they had before, if 

they had a standard policy beforehand. I acknowledge that Medicaid expansion did cover some uninsured. And even those who 

have it—and also the promise to hospitals who are part of the negotiations, was that they would save costs, and there would be less 

access to emergency rooms. Now they have more people going to 

emergency rooms, and it is because of these high deductible plans. 

So there are a lot of problems and promises that were made that weren’t kept on, what, $2,400 a year savings for a family of four, 

premiums would go down, copays would go down. If you like your 

policy, you keep it. If you like your doctor, you keep it. All those 

were not satisfied. 

So we are talking about tweaking and trying to fix—part of this 

is the cost sharing issue that we have been talking about, too, and 

how you incentivize. I am not a big supporter, and I am not a supporter of federally mandated plans without flexibility. But I do 

know that the cost sharing is based upon the silver and 60 percent 

amount. 

Dr. Gottlieb, would it make sense to shift that bronze to a 50 

percent, and not based upon the silver percentage? Would that help 

at all? 

Dr. GOTTLIEB. Well, I note that people have also talked about 

creating a copper plan for younger healthier people. It is probably 

going to be the case that a lot of the bronze plans end up pulling 

out of the market and insurers ship more towards the silver plans 

this year for a variety of reasons, not the least of which is the 

bronze plans ends up having to pay back the most amount of 

money because they ended up attracting the healthiest individuals. 

I think the problem stems from the rigid regulatory structure 

around the rating system and the fact that you can’t vary the actuarial value more than 2 percent up or down from these metal tiers. 

I think what we should be thinking about doing is providing much 

more rating flexibility to the insures so they can offer wider variety 

of different kinds of plans and offer different schemes, things like 

value-based insurance designs. 

Right now what they do is they try to develop a plan to meet an 

actuarial target, rather than to develop a plan that sort of optimizes a set of circumstances. 

Mr. SHIMKUS. And even in part of the value-based, or even the 

hospitals are going to be now incentivized to have quality care and 

quality care measures, which financially would be a value-based 

system. Would it not be? 

Dr. GOTTLIEB. I think as providers take actuarial risk, we are 

moving toward that. And that is maybe one of the good benefits of 

the consolidation that is underway of the healthcare system. I have 

been critical of consolidation. With respect to the rating and the 

tiers and the metals, there was a view that by having discrete metals, it would make it easier for consumers to understand actuarial 

value. But, in fact, I think the evidence shows consumers don’t necessarily understand actuarial value in relation to the metals. And 

we should think about conducting some real vigorous research 

65 

around whether or not consumers can be educated around just 

what the actuarial value means so we can provide number the 

number to the consumers, not just the metal. I think the 

Healthcare.Gov Web site is doing a better job of translating what 

actuarial value means in some practical settings. There are better 

tools to help people understand that. We can move towards a more 

flexible framework. 

Mr. SHIMKUS. And let me end up with this statement saying to 

you, Dr. Gottlieb: This auto enrolling debate, helpful, harmful, or 

is there an incentive to, if you auto enroll, people are losing idea 

of cost and coverage by just letting it roll? If you auto enroll one 

policy down because they weren’t engaged in making the decision, 

would that force a closer scrutiny of the policy? 

Dr. GOTTLIEB. Well, we talk about auto enrolling in the plan we 

put out through AEI. What we do is we provide a minimum subsidy level that is going to be sufficient for states to be able to auto 

enroll individuals in a basic plan. We give the flexibility of states 

to do that. 

Now, the reality is in our scheme, you are going to end up being 

auto enrolled into a basic healthcare plan that is only going to provide catastrophic coverage, so a lot of people are not going to like 

it. But we do talk about the concept in our plan. 

Mr. SHIMKUS. I talk about catastrophic coverage all the time, and 

I think that is where we need to be. 

Thank you, Mr. Chairman. I yield back. 

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

the gentleman from New York, Mr. Engle, 5 minutes for questions. 

Mr. ENGEL. Thank you, Mr. Chairman. I thank you and the 

ranking member for holding today’s hearing. 

Let me just say, you know, when you take a massive bill like the 

Affordable Care Act, of course, there are going to be problems with 

it. Major bills like this, whether it was Medicare or Medicaid or 

other large bills, you see how they work, and then you tweak them. 

You change things. You improve things. But, unfortunately, we 

haven’t been able to do that. The majority seems to be more intent 

on trying to get us to repeal it 62 or 63 times, which really wastes 

everybody’s time. We really should all put our heads together on 

both sides of the aisle and do some commonsense fixing. Not repeal 

it, because we really believe this Act is here to stay, and we believe 

that this is something that benefits people, because Ms. Corlette’s 

testimony is a very apt reminder of the practices that were routinely employed prior to the passage of the Affordable Care Act. 

Let’s state them, again: Denying insurance for people with preexisting conditions, forcing certain populations to pay exorbitant 

rates, applying lifetime limits to care. These practices, if you are 

under 26, you couldn’t stay on your parents’ plan. These practices 

were once commonplace in the individual insurance marketplace. 

So we have made this point numerous times, and I think it is 

important to, again, remind ourselves what the status quo used to 

be and how it affected people, people like our constituents, our families, and our friends. And as Ms. Corlette mentioned, like any law, 

the ACA is not perfect. But it has made a world of difference for 

those millions of Americans who were once denied coverage or 

66 

couldn’t afford it, and I think we need to keep working to ensure 

it continues to make a difference for millions more. 

Ms. Corlette, you notice that the ACA has allowed states to implement new delivery systems reforms, a space which New York 

has been tremendously successful. New York’s delivery system reform incentive payment program is laying the groundwork to ease 

payers’ and providers’ transitions from a fee-for-service system to 

one in which reimbursements are based on value, not volume. 

Through this program, often referred to as DSRIP, New York will 

be able to allocate more than $7 billion in Medicaid savings towards improvements to its healthcare system over the next several 

years. 

So would you talk a little more about the kinds of delivery system reforms that have been spurred by the ACA, and how those 

reforms might benefit the health system as a whole? 

Ms. CORLETTE. Yes, absolutely. I mean, I talked earlier about 

how health insurance is such an expensive product. And one of the 

reasons health insurance is so expensive is because the delivery of 

care and the way we pay for care is often irrational. So some of the 

things that the Affordable Care Act did was really launch some experiments, primarily using Medicare, but also Medicaid, and I 

think Covered California is an example of how a state could maybe 

use its marketplace to also get at some of these payment and delivery system issues. 

So some examples are encouraging expansion of patient centered 

medical homes, where care is truly coordinated and there is a real 

emphasis on primary care for people with chronic conditions, bundling payments for a particular medical procedure, so that, in some 

cases, providers are actually taking on some risk if they overdeliver 

services. That is another example. ACOs, accountable care organizations, again, where providers are taking on some risk; if they are 

over budget and not delivering quality of care, then they take a financial hit. 

So those are just a few examples of some of the demonstration 

projects and other things that are being launched, and New York 

is a great example of a state that is taking it up and running with 

it. 

Mr. ENGEL. Thank you. 

Mr. Shimkus had asked a question to one of the other panelists 

about actuarial value. I am wondering if you would like to comment or respond to that question? 

Ms. CORLETTE. Yes, sure. So the actuarial value targets are built 

around the bronze, silver, gold, platinum level plans. And, I mean, 

we talked a little bit earlier about how consumers are making 

trade-offs, right, between higher deductible, lower premium, higher 

premium, lower deductible. And that, it simply—these are signals 

for consumers to be able to help them make those trade-offs in a 

clear and understandable way. And as far as I can tell, they are 

working. Predominantly, people are enrolling in the silver level 

plans, but, you know, with 86 percent of people reporting satisfaction with their coverage in the marketplaces, it sounds like I think 

people are generally happy with their choices. 

Mr. ENGEL. Thank you. 

Thank you, Mr. Chairman. 

67 

Mr. PITTS. The chair thanks the gentleman. I now recognize the 

gentleman from Indiana, Dr. Bucshon, 5 minutes for questions. 

Mr. BUCSHON. Thank you, Mr. Chairman. This has been a productive discussion today. I was a cardiovascular and thoracic surgeon before coming to Congress, so, obviously, it is near and dear 

to my heart. The one thing we are not talking about, though, is the 

cost of the product, itself, is too expensive. I mean, that is not what 

this is about. You addressed some of that. 

The only way that we are going to get a handle on this is we are 

looking at ways to cover a product that continues to be too expensive itself, and so in some future hearings, hopefully we can address that. There is no price transparency in health care, very 

minimal from a consumer perspective, and it is third-party payer. 

The consumer doesn’t care what things cost, essentially, because 

they are not paying the bill for the most part. 

Quality transparency, which is improving. The Society of Thoracic Surgeons, my society, has had a database for almost 25 years 

that I participated in. The expansion of has is leading to some consumer-driven type health care, Healthy Indiana plan is the way we 

are covering our Medicaid population that is leading to decreased 

cost in that space, because consumers have a little bit of their own 

skin in the game. And we need to further incentivize preventive 

care by paying for it better because the people don’t get sick, it 

doesn’t cost you any money. 

So that is my lead-in. I would also like to say some of the mentioned problems in the marketplace that were just mentioned were 

recognized by both sides of the political aisle. Everybody recognized 

preexisting conditions was the problem. Everybody—all of those— 

it is everything else that the ACA did that was the issue. We could 

have solved those problems in a different way, in my opinion. 

The average Federal exchange premiums jumped 12.6 percent for 

bronze plans, and this is 2015; 11.3 percent for silver plans. 

Deductibles were up by $500 in the silver plans. The reality is the 

people I talked to, healthcare costs are going up for everyone. And 

I think even though, in fairness, there are many people that are 

happy with their insurance coverage, there are also complaining 

about the costs. 

The Gallup Poll recently said that healthcare costs are at the top 

of American families’ financial concerns, number one. 

So that said, a lot goes into rates: experience, trends, reinsurance, taxes, benefits, medical loss ratio, many of which are mandates in the ACA. 

Ms. Corlette, in your testimony, you note Congress should approve affordability. I think we all would agree with that. You say 

that we can achieve that through premium cost-sharing arrangements. Can you identify—and this would be for the full panel, but 

I will start with you. One, government mandate that could be 

eased today that would alleviate costs? You may not be willing to 

mention, to say—— 

Ms. CORLETTE. Yes, I have to take a minute to think about that. 

But I would happily cede to my counterparts while I am thinking 

about it. 

68 

Mr. BUCSHON. Yes, I mean, I think since I am one of the last to 

ask questions, some of them have been answered, right? The 3–1 

age premium limit is a big one, the MLR is a big one. Others? 

Ms. CORLETTE. I would only point out that by expanding the age 

rating you would be lowering costs for younger people, but raising 

them for older people. So, there are winners and losers when you 

do that. 

Mr. BUCSHON. Except for the fact that that is limiting the ability 

of younger people to enroll because the costs are too high for them 

to enroll in the plan in the first place. So—Mr. Roy. 

Mr. ROY. Correct. 

So in my written testimony, I provide a written illustration of 

this fact that, actually, the narrow age spans in the ACA end up 

increasing the cost of health insurance for older individuals as well, 

because the younger people don’t enroll, which increases premiums 

for everyone in the end through adverse selection. So I definitely 

would highlight that, as you mentioned. 

One thing I would bring up, since the goal is—you started in 

your question talking about, well, there are things in the ACA that 

we should change, and there are things that we should change, and 

there are things we should change to reform the way we pay for 

health care, and we absolutely do that as the core problem. 

But one area that I would highlight that we haven’t talked about 

today that is outside the scope of this today’s hearing, but I would 

encourage you to consider is hospital consolidation. The fact that 

hospitals are consolidating and taking market power in a particular locality and using that market power to basically dictate 

prices to insurance companies, which insurance companies and 

Medicaid is simply forced to pass on in the form of higher premiums. That is a huge problem. There’s a lot we could be doing to 

address the problem of hospital consolidation. 

Mr. BUCSHON. I am running out of time. 

Yes, and we are not even talking about the tax treatment of hospitals and the more complicated situation that we are in. Hospitals 

and insurance companies are building all the new glass buildings 

in every city that I visit, including my own. And it is getting harder 

and harder to justify to the constituents that their costs are going 

up, but yet, it appears that some of the providers of those things 

are doing quite well. 

I am out of time. I yield back. 

Mr. PITTS. The chair thanks the gentleman, now recognize the 

gentleman, Mr. Ca ́ rdenas, 5 minutes for questions. 

Mr. CA ́ RDENAS. Thank you very much, Mr. Chairman. And I really appreciate the opportunity to have this hearing. I hope, and it 

appears to me that maybe we are starting to speak more about how 

we can legislate and improve on the environment that we have 

post-ACA instead of just talking about how we should go back to 

a world before ACA. But here we are. So thank you very much, Mr. 

Chairman and colleagues. 

I am baffled that we would point out that healthcare costs keep 

rising, but it is my understanding—forget about my understanding. 

Could you answer the question, prior to the Affordable Care Act 

being passed, were healthcare costs going up in the United States 

69 

in overall consumption, overall GDP, et cetera, et cetera? Was it on 

the rise before the Affordable Care Act even got enacted? 

Mr. ROY. Healthcare costs have risen every year since time immemorial, but one thing that is important, I think the question, sir, 

that you are trying to get at is, has the rate of growth in 

healthcare costs increased or decreased? And there’s been, since 

2003, a decline in the rate of growth in the increase of healthcare 

costs and healthcare spending that has continued with accelerated 

and exacerbated by the global recession. And so, now we are starting to see just in the last year, actually, the growth in healthcare 

spending and healthcare costs have turned up again. So there has 

been a significant increase in the growth rate of healthcare costs 

since the ACA’s spending provisions went into effect. 

Dr. GOTTLIEB. I would just add to that and echo that. When you 

look at the analyst reports being put out and what the healthcare 

companies are reporting right now, they are reporting clearly at 

the end of what we call an underwriting cycle, where healthcare 

costs declined as consumption, but yet, it declined during the recession and now you are seeing healthcare consumption go back up, 

and costs are going back up with it, and that is what the insurers 

are reporting. So that should be concerning. I think we are going 

to see an acceleration in healthcare inflation in the coming years. 

Mr. CA ́ RDENAS. But weren’t we seeing double digit year over year 

healthcare costs going up prior to the Affordable Care Act being enacted? Go ahead. 

Ms. CORLETTE. Yes, sir. Before the Affordable Care Act was enacted, we were seeing double digit cost increases year over year, 

and since the ACA was enacted, we have seen lower costs growth 

year over year. 

Mr. CA ́ RDENAS. And before the ACA was enacted, what would 

happen to somebody if they had a precondition? Say somebody had 

previously cancer, and it was in remission, and then all of a sudden 

they found themselves out of the insurance market? Say I want to 

get insurance. What would happen before the ACA was enacted? 

Would somebody likely, really, honestly, be able to get insurance 

with that precondition? Go ahead. 

Ms. CORLETTE. Likely not. And I would point out, too, that 

there’s been a lot of discussion today about how much more expensive these health insurance products are post-ACA. Well, one reason health insurance was cheaper before the ACA is they didn’t 

cover sick people. So, yes, you can offer cheaper product if you don’t 

allow any sick people—— 

Mr. CA ́ RDENAS. If you legally exclude sick people. 

Ms. CORLETTE. Right. And if you don’t cover benefits and if you 

don’t cover mental health or prescription drugs, yes, the product 

will be cheaper. Will it provide the kind of financial protection that 

you and I and all of us with employer-based coverage are used to 

and expect? No. 

Mr. CA ́ RDENAS. Also, let me ask you a follow-up. Prior to the Affordable Care Act passing, say somebody did get cancer and they 

wanted treatments and, thank God, they actually were cured, what 

was the likely deductible that that family or individual was likely 

going to be saddled with, with a full-fledged chemotherapy, maybe 

even some operations removing some tumors, et cetera, et cetera, 

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et cetera? What was the likelihood of that individual or family 

being saddled with their own portion of the costs, even if they had 

insurance? 

Ms. CORLETTE. Financial stress is one of the biggest issues for 

cancer patients and their families, and not only can lead to medical 

bankruptcy and those kinds of things, but it also can really lead 

to worse health outcomes because of the trauma and stress of dealing with those financial costs. 

Mr. CA ́ RDENAS. But what were the likely costs? Was it $5,000, maybe $10,000, $20,000? 

Ms. CORLETTE. No. If you have a cancer that it could be tens of 

thousands, hundreds of thousands of dollars depending on the kind 

of—— 

Mr. CA ́ RDENAS. Now, since the ACA has been passed, that same 

scenario, how much would that person be saddled with after all of 

that remediation and all of the treatments? 

Ms. CORLETTE. I am really glad you mentioned that, because one 

thing we haven’t discussed is that the ACA provides a critical financial protection in terms of an out-of-pocket maximum—— 

Mr. CA ́ RDENAS. We are running out of time. What is that? 

Ms. CORLETTE. It is roughly $7,000 a year that it would be maximum you would have to pay. 

Mr. CA ́ RDENAS. Thank you. And also, look, I have a daughter. 

She is educated. She is a professional, so is her husband, both 

working. And when they had to go out and buy their own insurance, they were complaining. And when I asked them how much 

they were paying for this healthy couple, young couple, they were 

in their late 20s, they were complaining about the costs. And having been a former employer myself, I said, what are you complaining about? How much would it be? It was like a couple hundred bucks a months for them to get that coverage with a maximum deductible, $7,000, et cetera, et cetera, et cetera. 

And I was sitting there going, you know what, complaining about 

your health care cost is a matter of perspective, and some Americans are so dammed spoiled, including my own family, that they 

don’t even get the fact that we are in such a better place today. 

Thank you, I yield back. 

Mr. PITTS. The chair thanks the gentleman. I now recognize the 

gentleman, Mr. Bilirakis, 5 minutes for questions. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. I appreciate it. Thank 

the panel for their testimony today as well. 

Mr. Roy, in your testimony, you mentioned the convoluted tax 

credit system leading of incidents of waste, fraud, and abuse. 

Today, we have more confusion during tax time as people need 

more tax forms. A means-tested tax credit that penalizes midyear 

pay raises, and as recently as January, the IT report that CMS 

can’t, they cannot verify premiums paid before paying premium tax 

credits to insurance companies. 

Can you elaborate on some of these problems, and what we 

should do? Is there a better alternative to the current tax credit 

based-premium assistance program, the system? Is there a better 

way? 

Mr. ROY. Absolutely. And you correctly highlighted some of the 

examples of how problematic that system is. 

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One thing you often find is that people whose incomes are, say, 

200 percent of the Federal poverty level, their incomes are volatile. 

They are often working odd jobs and being freelancers, so their income goes up and down. 

So if they have to estimate what their income might be for the 

next month, and then it turns out they estimated that inaccurately 

and the subsidy they received is inaccurate because of that, theoretically, by law, the Treasury Department is supposed to go after 

them and recover what excess subsidies they received and vice 

versa. 

That is an incredibly cumbersome system, and it also 

incentivizes people to underestimate their income in order to receive subsidies, knowing that the Treasury Department doesn’t 

really enforce that clawback provision as often as they should. 

So this is a serious problem, and the best way to deal with it is 

through a statutory change that, as I discussed in my written and 

oral testimony, would use the previous year’s taxable income as the 

basis for whatever assistance you provided in the following year. 

Now, that of course would not 100 percent match with your daily 

or monthly income, but that is the tradeoff for a system that is 

much more easily enforced where there would be very limited 

waste, fraud, and abuse, compared to the system we have today 

where there is enormous—as you mentioned, the OIG reports and 

other reports have estimated that there have been billions of dollars of misplaced subsidies and misallocated subsidies as a result 

of the very cumbersome, technocratic system that the ACA imposed. 

Mr. BILIRAKIS. Dr. Gottlieb, do you have any thoughts on a better 

premium system, subsidy system? 

Dr. GOTTLIEB. This is the reality of—look, we have never done 

this before. We have never tried to provide middle class consumers 

a subsidy based on income that changes as their income grows. 

And trying to create that framework is going to lead to very odd 

structures like the clawback, and people might underestimate their 

income just to get the float for the coming year, not to mention 

what Avik mentioned with respect to the fact that there isn’t real 

enforcement in terms of clawing back that money, so you are getting a lot of wasteful spending. 

This is why we advocate an age-based subsidy and a subsidy 

structure that allows the subsidies to be tied to a looser rate-setting environment where premiums can adjust based on risk. And 

I know there is a lot of criticism of an age-based subsidy because 

people who are in lower-income brackets might not get enough of 

a subsidy to be able to go into the market in as robust of a fashion 

as they are under the current scheme. These are the tradeoffs. I 

mean, an age-based subsidy and a risk-based subsidy will eliminate 

the need to have these really odd tax consequences that we have 

right now that I think aren’t going to be fully enforceable. 

Mr. BILIRAKIS. Thank you for those suggestions. 

Dr. Gottlieb, you testified here in 2014 about the problems of 

narrow networks in the ACA. At the time, I used a very real example of the Moffitt Cancer Center, which is just outside my district— 

the only NCI-designated cancer center in Florida, by the way—only 

being available at that time in 1 out of 12 ACA plans in Florida. 

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It seems to me that the people most disadvantaged by the law 

may be the sick patients with serious, chronic, complex medical 

conditions. Unfortunately, the problem of narrow networks seems 

to be growing, unfortunately. 

Can you talk about the growth of closed pharmacies, the continued narrow networks, and how we may build a system with more 

patient choices? 

Dr. GOTTLIEB. The insurers are doing what they can to try to 

control costs in the marketplace that I think where the pool has 

ended up much more skewed than what people anticipated. So they 

are trying to cheapen the benefit, and they are doing that by continuing to narrow the networks and close drug formularies. 

CMS is starting to apply more oversight on the networks and 

network adequacy right now. They are not applying as much oversight on the formularies. And so you are seeing very restrictive 

formularies. I went through and systematically looked at about 25 

plans for the coverage around drugs for multiple sclerosis. I found 

that most plans excluded 6 or 7 of the 12 top drugs that you use 

to treat the disease, and that is a disease where you want to provide maximal flexibility to patients in treatment selection. 

I think these are just the consequences of a very prescriptive regulatory scheme that takes away a lot of the other tools insurers 

might have to try to manage costs. They are going to manage costs 

through the only vehicles they have, and this is all that we have 

left them. And so I think you will continue to see increased 

ratcheting down to the extent that CMS is going to allow it under 

regulation. 

Mr. BILIRAKIS. Mr. Roy, any thoughts? 

Mr. ROY. Yes. So I think that it is part of a continuum of problems with when you have a cumbersome system and you don’t have 

the right enforcement, what are you going to do? You basically 

have to go through various complicated—the IRS doesn’t audit people’s monthly income statements. 

So, again, the simplest way to deal with this is, if you go by the 

previous tax year’s income, and then you have an age-adjusted subsidy along with it, then what you can do is—it is very transparent. 

People can know ahead of time, OK, here is my age, here is my income in the previous tax year, here is the assistance I am going 

to get. 

And then you pair that with a regulatory system that gives people the flexibility so that insurers have the freedom to offer young 

people and healthy people plans that are affordable to them that 

accurately represent the expected healthcare consumption they 

might have in a given year. 

Mr. PITTS. The gentleman’s time has expired. Thank you. 

That concludes the questions of the members present. We will 

have some additional questions from members. We will submit 

them to you in writing. I ask that you please respond. 

Terrific panel today. Thank you so much. 

Members have 10 business days to submit questions for the 

record. That will be close of business on Wednesday, May 25. 

Without objection, the hearing is adjourned. 

[Whereupon, at 12:02 p.m., the subcommittee was adjourned.] 

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