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22–696 2017

THE AFFORDABLE CARE ACT ON SHAKY GROUND: 

OUTLOOK AND OVERSIGHT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

AND THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 14, 2016 

Serial No. 114–168 

( 

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 

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 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

BRETT GUTHRIE, Kentucky 

Vice Chairman 

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) 

Page

III 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

TIM MURPHY, Pennsylvania 

Chairman 

DAVID B. MCKINLEY, West Virginia 

Vice Chairman 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

H. MORGAN GRIFFITH, Virginia 

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 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

KATHY CASTOR, Florida 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

JOSEPH P. KENNEDY, III, Massachusetts 

GENE GREEN, Texas 

PETER WELCH, Vermont 

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 ................................................................... 2 

Prepared statement .......................................................................................... 3 

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

opening statement ................................................................................................ 3 

Hon. Tim Murphy, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 5 

Prepared statement .......................................................................................... 6 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 7 

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

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

Prepared statement .......................................................................................... 10 

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

New Jersey, prepared statement ........................................................................ 11 

WITNESSES

Andy Slavitt, Acting Administrator for Centers for Medicare & Medicaid 

Services ................................................................................................................. 13 

Prepared statement .......................................................................................... 16 

Answers to submitted questions 1 ................................................................... 103 

Gloria Jarmon, Deputy Inspector General for Audit Services, Office of Audit 

Services, Office of Inspector General .................................................................. 26 

Prepared statement .......................................................................................... 28 

Seto Bagdoyan, Director of Forensic Audits and Investigative Service, U.S. 

Government Accountability Office ...................................................................... 38 

Prepared statement .......................................................................................... 40 

SUBMITTED MATERIAL

GAO Report, September 2016, 2 submitted by Ms. DeGette 

Article entitled, ‘‘Long’s Short Report—Affordable Care Act’s effects on education,’’ by U.S. Representative Billy Long ........................................................ 96 

Article entitled, ‘‘Uncertainty surrounds whether newly Medicaid-eligible in 

Louisiana can keep their Obamacare plans if prefer them,’’ The Advocate, 

July 3, 2016, submitted by Mr. Guthrie ............................................................. 98 

1 Mr. Slavitt did not respond to questions for the record. 2 Available at: http://docs.house.gov/meetings/IF/IF02/20160914/105306/ 

HHRG-114-IF02-20160914-SD003.pdf. 

(1) 

THE AFFORDABLE CARE ACT ON SHAKY 

GROUND: OUTLOOK AND OVERSIGHT 

WEDNESDAY, SEPTEMBER 14, 2016 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

JOINT WITH THE

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

210 Capitol Visitor Center, Hon. Joe Pitts (chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Barton, Guthrie, Shimkus, Murphy, Blackburn, McMorris Rodgers, Lance, McKinley, 

Griffith, Bilirakis, Long, Ellmers, Bucshon, Flores, Brooks, Mullin, 

Hudson, Collins, Barton, Upton (ex officio), Green, Engel, Schakowsky, Castor, Matsui, Tonko, Yarmuth, Schrader, Kennedy, 

Cardenas, and Pallone (ex officio). 

Staff present: Gary Andres, Staff Director; Jennifer Barblan, 

Counsel, Oversight & Investigations; Elena Brennan, Staff Assistant; Adam Buckalew, Professional Staff, Health; Rebecca Card, Assistant Press Secretary; Karen Christian, General Counsel; Ryan 

Coble, Detailee, Oversight & Investigations; Paige Decker, Executive Assistant; Paul Edattel, Chief Counsel, Health; Emily Felder, 

Counsel, Oversight & Investigations; Jay Gulshen, Legislative 

Clerk; Brittany Havens, Professional Staff, Oversight & Investigations; Charles Ingebretson, Chief Counsel, Oversight & Investigations; Emily Martin, Counsel, Oversight & Investigations; Chris 

Sarley, Policy Coordinator, Environment & Economy; Jennifer 

Sherman, Press Secretary; Adrianna Simonelli, Prof. Staff Member, 

Health; Heidi Stirrup, Health Policy Coordinator; Luke Wallwork, 

Staff Assistant; Gregory Watson, Legislative Clerk, Communications and Technology; Jean Woodrow, Director, Information Technology; Jeff Carroll, Minority Staff Director; Ryan Gottschall, Minority GAO Detailee; Tiffany Guarascio, Minority Deputy Staff Director and Chief Health Advisor; Chris Knauer, Minority Oversight 

Staff Director; Elizabeth Letter, Minority Professional Staff Member; Miles Lichtman, Minority Staff Assistant; Dan Miller, Minority 

Staff Assistant; Rachel Pryor, Minority Health Policy Advisor; 

Samantha Satchell, Minority Policy Analyst; Arielle Woronoff, Minority Health Counsel; and C.J. Young, Minority Press Secretary. 

2 

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

OF PENNSYLVANIA 

Mr. PITTS. The subcommittee will come to order. The chair will 

recognize himself for an opening statement. Today’s hearing is especially timely as we learn startling news over the summer, confirming our worst fears that some of the most significant health insurers—United Health, Aetna, Humana—are opting out of the Affordable Care Act’s health insurance exchanges. This is concerning 

on several levels, the most basic being for individuals who are paying more only to get less. 

One of the most ambitious aspects of the Affordable Care Act, the 

ACA, was the creation of the health insurance marketplaces. Proponents of the ACA said it would increase market competition and 

lead to lower costs for consumers and insurers, but in fact just the 

opposite has happened. Consumer health insurance options are 

now more limited and insurers have been driven out of the ACA 

marketplace. The exchanges have faced numerous problems: lower 

than expected enrollment with sicker people enrolling; larger, unpredictable operational costs; and insurers leaving the exchanges. 

Of particular concern are the persistent vulnerabilities of the application, eligibility,and enrollment processes. Just this week, the 

Government Accountability Office released two reports detailing 

the severity of the lack of real safeguards in the exchanges. Of the 

18 fictitious applications GAO made for subsidized plans in 2015, 

17 received coverage. GAO was initially 15 for 15 in 2016, with one 

fictitious applicant enrolling in three different states at the same 

time. 

Also of interest, Section 1322 of the ACA established the Consumer Operated and Oriented Plan, CO–OP program, but these too 

are failing, one as recently as Tuesday, and disrupting coverage for 

thousands of enrollees. CO–OPs were set up to increase competition, but instead of the original 23 CO–OPs funded with 2.3 billion 

taxpayer dollars only six are still in existence, further reducing coverage for thousands of people in the middle of the plan year, resulting in higher out-of-pocket costs and changing doctors. 

Our Oversight and Investigations Committee has conducted critical work in this area as well as on the functionality of state-based 

exchanges. The staff reports we will review today are thorough and 

provide a sad reminder of the failed promises this misguided law 

delivers. 

We have before our committees today some of the very officials 

who can answer our questions surrounding these troubling reports: 

the acting CMS administrator, the HHS OIG deputy inspector general for Audit Services, and the Government Accountability Office. 

I look forward to hearing about the oversight work conducted by 

the GAO and HHS OIG, as well as the steps taken by CMS to improve the exchange risks and CO–OP programs. The chair now recognizes the ranking member of the Health subcommittee, Mr. 

Green, 5 minutes for his opening statement. 

[The prepared statement of Mr. Pitts follows:] 

3 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

Today’s hearing is especially timely as we learned startling news over the summer, confirming our worst fears, that the some of the most significant health insurers—UnitedHealth, Aetna, Humana—are opting out of Obamacare’s health insurance exchanges. This is concerning on several levels—the most basic being for individuals who are paying more only to get less. 

One of the most ambitious aspects of the Affordable Care Act (ACA) was the creation of the health insurance marketplaces. Proponents of the ACA said it would 

increase market competition and lead to lower costs for consumers and insurers. But 

in fact, just the opposite has happened. Consumer health insurance options are now 

more limited, and insurers have been driven out of the ACA marketplace. 

The exchanges have faced numerous problems—lower than expected enrollment 

with sicker people enrolling; larger, unpredictable operational costs; and, insurers 

leaving the exchanges. 

Of particular concern are the persistent vulnerabilities of the application, eligibility, and enrollment processes. Just this week, the Government Accountability Office released two reports detailing the severity of the lack of real safeguards in the 

exchanges. Of the 18 fictitious applications GAO made for subsidized plans in 2015, 

17 received coverage. GAO was initially 15 for 15 in 2016, with one fictitious applicant enrolling in three different states at the same time. 

Also of interest, Section 1322 of the ACA established the Consumer Operated and 

Oriented Plan (CO–OP) program. But these, too, are failing (one as recently as 

Tuesday)—and disrupting coverage for thousands of enrollees. Co–ops were set up 

to increase competition. But instead of the original 23 co–ops funded with $2.3 billion taxpayer dollars, only six are still in existence further reducing coverage for 

thousands of people—in the middle of the plan year, resulting in higher out of pocket costs and changing doctors. 

Our Oversight and Investigations Committee has conducted critical work in this 

area as well as on the functionality of state—based exchanges. The staff reports we 

will review today are thorough and provide a sad reminder of the failed promises 

this misguided law delivers. 

We have before our committees today some of the very officials who can answer 

our questions surrounding these troubling reports—the Acting CMS Administrator, 

the HHS OIG Deputy Inspector General for Audit Services, and the Government Accountability Office. 

I look forward to hearing about the oversight work conducted by the GAO and 

HHS OIG; as well as the steps taken by CMS to improve exchange risks and CO– 

OP programs. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman. It is just 6 years since 

enactment and 3 years since the major reforms of the Affordable 

Care Act, the ACA, went into effect. The law is delivered on a principal goal of covering millions of previously uninsured Americans. 

Today, 20 million more people have insurance, health insurance, 

and the percentage of the uninsured Americans is at an all-time 

low. This is a historic and dramatic improvement over where we 

were as a nation before the ACA and should not be undervalued. 

All this is achieved in spite of relentless political opposition, constant efforts to undermine and chip away at the law, severe underfunding, and the inherent challenges of launching a stabilizing and 

new marketplace. As we look at the future of the ACA great opportunities exist to improve the law, but we can’t take them unless we 

move from this bitter partisanship. It is long past time for some to 

accept the ACA as the law of the land and get back to work on behalf the American people. 

Prior to the Affordable Care Act, the individual health insurance 

market was deeply broken. People were sold junk plans at high 

cost, many individuals with preexisting conditions were essentially 

4 

locked out of the market altogether and plans could drop you at the 

moment you got sick, the time when you needed the coverage the 

most. As a result of the ACA, the newly insured, previously insured 

are protected from the worst abuses in the industry and the standard for what plans must cover is significantly more robust. 

Marketplace premiums are currently 12 to 20 percent lower than 

the Congressional Budget Office predicted when the ACA was 

passed. Premiums for 150 million Americans with employer coverage have grown more slowly than before the law was enacted. 

The marketplace created under the Affordable Care Act is in its 

relative infancy, but with almost every new market there is an adjustment period in the early years. We saw this when Medicare Advantage and Part D programs were created. 

Recent reports of high premium increase and carriers entering 

and exiting the exchanges have garnered much attention. We have 

seen similar headlines in years before, but the reality on the 

ground has yet to reflect the predictions of doom and gloom. Insurers will both enter and exit the marketplace as they navigate the 

new landscape of millions of new customers and consumer protections. 

It is no surprise that companies are adapting at different rates 

to the market. They compete for business on cost and quality rather than cherry picking customers and denying coverage to people 

with preexisting conditions. The Affordable Care Act is working; 

like any law it is not perfect. It would take an earnest effort on the 

part of Congress and the States and regulators to bring forth solutions that further stabilize the market. This can only be done if we 

are honest and separate overblown portrayals that don’t reflect the 

facts of the meaningful critiques. 

For several reasons 2017 is the unique transition year. One reason is that the programs designed to support the market in the 

early years are ending and will have a one-time effect on cost. Yet 

we also see the marketplace risk pool strengthened by robust outreach efforts to the young adults not yet taking advantage of the 

opportunity to get coverage. 

The Department of Health and Human Services, HHS, is also 

taking steps such as developing new processes to prevent misuse 

of special enrollment periods and curb abuse of short-term plans 

that keep healthy customers out of the risk pool. 

Nineteen states also need to expand Medicaid. In my district in 

Texas, and Texas is one of those 19 states, if they expanded Medicaid 50,000 of my constituents would have Medicaid, if the state 

expanded it. The law was designed on the assumption that all 

states would, and refusal to do distorts the health care ecosystem. 

A recent report from HHS shows that not only does Medicaid expansion have enormous economic benefits for states, but on the average marketplace premiums in expansion states are 7 percent 

lower than those non-expansion states. The ACA has led to higher 

consumer satisfaction and lower uninsured rates. Data supports 

the further stabilization of the marketplace in the future. 

It is now time for Congress to put aside partisanship and finally 

come together and improve the law. The American people are 

counting on it. And I look forward to hearing from our witnesses, 

and I thank you, Mr. Chairman, and I yield back my time. 

5 

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

the gentleman from Pennsylvania, Dr. Murphy, chair of the O&I 

Subcommittee, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA 

Mr. MURPHY. Thank you, Mr. Chairman. This committee began 

its investigation of the state-based exchanges in the spring of 2015, 

and we aimed to examine why the state exchanges failed to correctly and effectively utilize billions in federal grant funding. The 

committee requested and received documents from the 17 original 

state exchanges, and over the course of two hearings we heard testimony from state exchanges’ leaders and federal officials. 

Our investigation found that the Center for Medicare & Medicaid 

Services, CMS, effectively wasted $4.6 billion in grants due to excessively careless management and oversight. Disappointingly, and 

despite the fact that four out of the 17 state exchanges have now 

closed down, a very small and very inconsequential amount of improperly spent federal dollars have been recouped by CMS. 

We were told that state exchanges would be self-sustaining by 

January 1st, 2015, and afterwards any continued use of federal 

grant money would be illegal. Yet today every state exchange is 

still using federal money. Moreover, some state exchanges went so 

far as to violate federal rules and use Medicaid dollars to pay for 

unallowable state-based exchange expenses. The details and findings from the committee investigations are outlined in our report 

that was released yesterday, September 13, 2016. 

In addition to the work that we have done on state exchanges, 

the subcommittee held a hearing last November on the CO–OPs 

and their costly failures. We examined the factors that contributed 

to the collapse of now 17 out of 23 CO–OPs, what oversight mechanisms CMS used to monitor the CO–OPs, and the likelihood that 

the federal government would recoup any of the loans awarded to 

the failed CO–OPs. 

Since the hearing in November, five more CO–OPs have closed 

leaving only six of the original 23 remaining. And these failed CO– 

OPs have cost the taxpayers a total of $1.8 billion. Similar to the 

state exchanges, the committee’s investigation into the CO–OPs 

found that they were disadvantaged from the start. Rigorous loan 

agreements, restrictions to obtain outside capital, and flawed premium stabilization programs made financial stability near impossible. 

What ultimately contributed to the failure of CO–OPs, however, 

was CMS mismanagement and ineffective oversight as they failed 

on numerous occasions to assist the CO–OPs when needed. Recently, HHS OIG released a report which found that the majority 

of CO–OPs are nearing bankruptcy, making it highly unlikely that 

the remaining six CO–OPs will pay back any of their loans. This 

will result in the loss of even more taxpayer money and leaving 

hundreds of thousands of Americans displaced with insurance coverage. The details and findings from the committee’s investigation 

are outlined in our report that we released yesterday. 

6 

While we look forward to a productive dialogue with our witnesses today, I want to note that on behalf of this committee we 

are deeply troubled by the findings of this investigation. Ultimately, what we are seeing is the Affordable Care Act failing the 

American people. The objective of the law was to provide health insurance to those who could not afford it, yet these findings prove 

that the ACA is accomplishing just the opposite. 

Hundreds of Americans have been uprooted from their plans and 

left without any insurance coverage, thousands I should say. Both 

of the committee reports suggest recommendations for legislative 

and administrative changes to address the concerns highlighted in 

the reports. It is my hope then that we are able to have an honest 

and open conversation about the reality of this legislation and discuss solutions rather than continue to identify its well known problems. 

I thank the witnesses for testifying today and look forward to 

hearing the questions, and with that Mr. Chairman I yield back. 

[The prepared statement of Mr. Murphy follows:] 

PREPARED STATEMENT OF HON. TIM MURPHY

Today, we are here to examine two failed programs of the Affordable Care Act 

(ACA): the State–Based Exchanges and the Consumer Oriented and Operated 

Plans, known as ‘‘CO–OPs’’. First, I want to highlight and thank the HHS Inspector 

General and the Government Accountability Office for their continued participation 

and good work for this Committee. This hearing, as part of the ongoing oversight 

of the ACA, will specifically focus on the current state of implementation and challenges of the State–Based Exchanges and CO–OPs. 

The Committee began its investigation of the State–Based Exchanges in the 

spring of 2015. We aimed to examine why the state exchanges failed to correctly 

and effectively utilize billions in federal grant funding. The Committee requested 

and received documents from the 17 original state exchanges, and over the course 

of two hearings, heard testimony from state exchange leaders and federal officials. 

Our investigation found that the Centers for Medicare & Medicaid Services (CMS) 

effectively wasted $4.6 billion in grants due to excessively careless management and 

oversight. Disappointingly—and despite the fact that four out of 17 state exchanges 

have closed down—a very small, and very inconsequential, amount of improperly 

spent federal dollars have been recouped by CMS. 

We were told that state exchanges would be self-sustaining by January 1, 2015 

and afterwards, any continued use of federal grant money would be illegal. Yet 

today, every state exchange is still using federal money. Moreover, some state exchanges went so far as to violate federal rules and used Medicaid dollars to pay for 

unallowable state–based exchange expenses. The details and findings from the Committees’ investigation are outlined in our report that was released yesterday, September 13, 2016. 

In addition to the work that we have done on State Exchanges, the Subcommittee 

held a hearing last November on the CO–OPs and their costly failures. We examined the factors that contributed to the collapse of now 17 out of 23 CO–OPs; what 

oversight mechanisms CMS used to monitor the CO–OPs; and the likelihood that 

the federal government would recoup any of the loans awarded to the failed CO– 

OPs. 

Since the hearing in November, five more CO–OPs have closed, leaving only six 

of the original 23 remaining. These failed CO–OPs have cost the American taxpayers a total of $1.8 billion dollars. Similar to the state exchanges, the Committee’s 

investigation into the CO–OPs found that they were disadvantaged from the start— 

rigorous loan agreements, restrictions to obtain outside capital, and flawed premium 

stabilization programs made financial stability near impossible. 

What ultimately contributed to the failure of CO–OPs, however, was CMS’ mismanagement and ineffective oversight, as they failed on numerous occasions to assist the CO–OPs when needed. Recently, HHS–OIG released a report which found 

that the majority of CO–OPs are nearing bankruptcy, making it highly unlikely that 

the remaining six CO–OPs will pay back their loans. This will result in the loss of 

even more taxpayer money and leaving hundreds of thousands of Americans disVerDate Nov 24 2008 15:23 May 10, 2017 Jkt 037690 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-168 CHRIS
7 

placed with insurance coverage. The details and findings from the Committees’ investigation are outlined in our report that was released yesterday, September 13, 

2016. 

While we look forward to a productive dialogue with our witnesses today, I want 

to note that on behalf of this Committee, we are deeply troubled by the findings of 

this investigation. Ultimately, what we are seeing is the Affordable Care Act failing 

the American people. The objective of the law was to provide health insurance to 

those who could not afford it, yet these findings prove that the ACA is accomplishing just the opposite. Hundreds of Americans have been uprooted from their 

plans and left without any insurance coverage. Both of the Committee reports suggest recommendations for legislative and administrative changes to address the concerns highlighted in the reports. It is my hope, then, that we are able to have an 

honest and open conversation about the reality of this legislation and discuss solutions, rather than continuing to identify its well-known problems. 

Today we will hear from CMS’ Acting Administrator Andy Slavitt, the Deputy Inspector General for Audit Services at the HHS OIG Ms. Gloria Jarmon, and Director 

of Audit Services for GAO’s Forensic Audit and Investigative Services mission team, 

Mr. Seto Bagdoyan. I thank the witnesses for testifying today and look forward to 

hearing answers to our questions. 

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

the ranking member of the Oversight and Investigation Committee, 

Ms. DeGette from Colorado, 5 minutes for opening statement. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you so much, Mr. Chairman. I have been 

wondering about the Affordable Care Act. Do you know if it covers 

treatment for deja vu, because there seems to be a mass outbreak 

of that on Capitol Hill when it comes to the ACA. Here are some 

of the symptoms. 

One, between the Health Subcommittee and the Oversight Subcommittee as you heard that I am ranking member of, we have had 

over 40 hearings on the ACA since it became law in 2010. Two, we 

have been through 6 years of efforts to repeal and undermine the 

law. Three, we have seen any number of administration officials, 

some of whom are sitting here today, interrogated by hostile members of Congress about their work to implement the law. These 

same officials have been the target of countless letters requesting 

briefings and documentation of every single aspect of their work. 

But despite the hours and hours spent on these efforts, House 

Republicans have nothing to show for it. Mr. Murphy, my chairman 

on the Oversight Subcommittee, just mentioned the recent Oversight & Investigations hearings that we have had in our committee. 

Instead of conducting a good faith review of these issues followed 

up by targeted, thoughtful bipartisan legislation to improve the law 

as Congress did on other major pieces of health care legislation like 

the Medicare Part D program that was passed by the Republican 

Congress some years ago, this Congress has used its oversight powers to highlight failures over and over again while offering no solutions. 

As we just heard from Mr. Murphy we have had two hearings 

this Congress on the ACA state insurance marketplaces, but again 

we are going to hear today about how some states struggle to set 

up exchanges and make them work as efficiently as possible. As 

you heard, we had a hearing earlier this Congress about the CO– 

OPs and I am sure we are going to hear today again about the fact 

8 

that many CO–OPs, including one in my state of Colorado, have 

failed or are facing challenges. 

This is not news, folks. What would be news is if the majority 

would actually sit down with us and try to work out some solutions 

to help more and more Americans get affordable and expansive 

health care insurance. I am not saying that these issues are not 

worth congressional attention. But what I am saying is it is time 

to stop having this kabuki dance over and over again, and it is 

time to start figuring out how we can fix the Affordable Care Act. 

Highlighting solutions or making important course corrections 

requires a willing Congress and at this point my colleagues on the 

other side of the aisle don’t seem to be willing to admit to the public that the law has actually helped millions of people and it simply 

needs fixing rather than being repealed. 

Now in conversation privately with me, many of my colleagues 

on the other side of the aisle offer thoughts that perhaps we can 

work on this together in the next Congress. But in the meantime, 

all we are doing is having hearing after hearing and wasting a lot 

of time and money that could be spent giving more insurance to 

more people on these hearings. 

Let me just briefly in the final remaining seconds that I have remind people of what the ACA has done even with the flaws that 

it has. We have had historic reductions in the number of uninsured 

people in this country. The CDC reported last week that the uninsured rate is at a historic low, the lowest that we have had in four 

decades. That is an accomplishment. Since the passage of the ACA, 

20 million previously uninsured Americans now have coverage. 

This includes millions of young adults who can now stay on their 

parents’ plans until age 26. 

I just want to interject a personal note here. My daughter 

Francesca who everybody on this committee knows, she just graduated from college. She is 22 years old. She is also a type 1 diabetic. Francesca just left to go teach in Madrid for a year, to teach 

English in Madrid for a year, and she is on my insurance. And because of the Affordable Care Act she can’t get thrown off of my insurance because she has a preexisting condition or because she is 

over 21. And furthermore, we were able to get her a year’s worth 

of diabetic supplies before she left for Madrid. 

There are thousands of families in the United States who are 

benefiting in the way my family has, and I am going to fight until 

the end to make sure that they can keep these benefits and that 

we can keep expanding it so that every American has high quality 

health insurance. I yield back. 

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

the Chairman of the full committee, the gentleman from Michigan, 

Mr. Upton, 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. So in 2009, the American 

people were promised a new health care system, one that would 

give patients a one-stop shop to choose a plan that would be affordable. And of course at that time we remember the President saying 

you will have your choice of a number of plans that offer a few difVerDate Nov 24 2008 15:23 May 10, 2017 Jkt 037690 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-168 CHRIS
9 

ferent packages, but every plan would offer an affordable basic 

package. 

So 6 years later the facts tell, I think, a different story. Major 

health insurers like Aetna, Humana, United fleeing the exchanges, 

leaving as many as one third of counties and seven entire states 

with only one carrier. And with New Jersey’s collapse this week, 

17 CO–OPs have now closed their doors costing taxpayers nearly 

$2 billion and resulting in tens of thousands of Americans without 

a plan. And today, just 12 states are running their own exchange, 

12. Premiums are off the charts; competition has dramatically declined; all in all, the everyday patient is left paying for fewer 

choices. 

But every number has a name and each one of these patients indeed have a story to tell. Karen from Lawton, Michigan tells us she 

pays $700 for insurance. She and her kids are in the process of 

choosing between having a home or having health insurance and 

moving back with her folks. She says because of the Affordable 

Care Act my insurance has doubled. Please, you have to do something to help me, help the hardworking middle class in this country. 

Lisa lives about an hour east of Karen and her kids. She is paying $744 a month for a plan with a $3,000 deductible. Before the 

ACA she paid less than $300 a month for her family’s health care, 

and my bet is she wishes she had the plan she had before. Greg 

who lives with his wife of 40 years in Kalamazoo is feeling the 

pain. He says ACA is a disaster; has been from the start. I think 

he is right. 

When this law was sold to struggling Michiganders and patients 

across our country, they were promised that as many as 21 million 

new individuals would get coverage through exchanges by the end 

of 2016. Sadly, even with the individual and employer mandates, 

this number is set to come in at about half, simply one reason why 

House Republicans have offered a better way to help patients get 

and keep health insurance. 

Our solution puts patients first, improves the quality of care, 

lowers health care costs, restores freedom and flexibility, it also 

keeps patients on their parents’ insurance until they are 26 years 

old and will not deny coverage based on preexisting conditions. We 

want to lead the world in cures and treatments, and our plan 

builds upon this important work outlined in the 21st Century 

CURES Act to help deliver cures now. 

Recent nonpartisan analysis of our reform plan found that solutions would, in fact, lower premiums by 10 to 35 percent, increase 

access to doctors and boost medical productivity all while cutting 

the deficit by nearly half a trillion dollars over the next decade. 

The ambitious plan, one where nobody would be priced out of 

health care, everyone in Michigan, these three—Karen, Lisa and 

Greg—and across America deserves access to quality and affordable 

health care. I yield the balance of my time to the gentlelady from 

Tennessee. 

[The prepared statement of Mr. Upton follows:] 

10 

PREPARED STATEMENT OF HON. FRED UPTON

In 2009, the American people were promised a new health care system: one that 

would give patients a one–stop shop to choose a plan that would be affordable. At 

the time, the president said, and I quote, ‘‘You will have your choice of a number 

of plans that offer a few different packages, but every plan would offer an affordable, basic package.’’ 

Six years later, the facts tell a different story. Major health insurers—like Aetna, 

Humana, and UnitedHealth—are fleeing the exchanges, leaving as many as one– 

third of counties and seven entire states with only one carrier. With New Jersey’s 

collapse this week, 17 CO–OPs have now closed their doors, costing taxpayers over 

$1.8 billion and resulting in tens of thousands of Americans without a plan. And 

today, just 12 states are running their own exchange. 

Premiums are off the charts. Competition has dramatically declined. All in all, the 

everyday patient is left paying more for fewer choices. But every number has a 

name. And each one of these patients has a story to tell. Take Karen from Lawton, Michigan. She pays $700 a month for her insurance. 

Karen and her kids are in the process of choosing between having a home, or having 

health insurance and moving back in with her parents. 

‘‘Because of the Affordable Care Act my insurance has doubled. Please,’’ Karen 

pleaded, ‘‘you have to do something to help the hard working middle class in this 

country.’’ 

Or Lisa, who lives about an hour east of Karen and her kids. She’s paying $744 

a month for a plan with a $3,000 deductible. Before the Affordable Care Act, Lisa 

paid less than $300 a month for her family’s health care. 

Greg, who lives with his wife of 40 years in Kalamazoo, is feeling the pain too. 

‘‘The ACA is a disaster,’’ Greg said. ‘‘has been from the start.’’ 

Greg’s right. When this law was sold to struggling Michiganders and patients 

across our country, they were promised that as many as 21 million individuals 

would get coverage through exchanges by the end of 2016. Sadly, even with the individual and employer mandates, this number is set to come in at about half. 

This is simply one reason why House Republicans have offered a better way to 

help patients get—and keep—health coverage. Our solutions put patients first, improve the quality of care, lower health care costs, and restore freedom and flexibility. It also keeps patients on their parents insurance until they are 26 years old, 

and will not deny coverage based on pre—existing conditions. We want to lead the 

world in cures and treatments, and our plan builds upon the important work outlined in the 21st Century Cures Act to help deliver cures now. 

A recent non-partisan analysis of our reform plan found that the solutions would 

lower premiums by 10 to 35 percent, increase access to doctors, and boost medical 

productivity—all while cutting the deficit by $481 billion over the next decade. 

It’s an ambitious plan—one where nobody would be priced out of health care. Everyone in Michigan—Karen, Lisa, Greg—and across America deserves access to 

quality, affordable health care. 

Mrs. BLACKBURN. And thank you, Mr. Chairman, and thank you 

all for being here to talk with us today. We do look at this plan 

and we realize that the Affordable Care Act product is unaffordable 

and that it is indeed on shaky ground as the hearing title reflects. 

I will spend some of my time today talking with you about the 

special enrollment periods. I come from Tennessee. We had 

TennCare. We know that these special enrollment periods have a 

tendency to get these programs into trouble. Lack of verification, 

inappropriate verification, delayed verification, all of a sudden 

what you do is end up with a plan that is on shaky ground and 

with out-of-balance risk pools. 

So as you look at the imbalance within these, we will want to 

drill down on that just a little bit. I do have legislation, H.R. 5589, 

the Plan Verification and Fairness Act that would get to the heart 

of this issue because it is a problem that worsens every single day. 

And when you have a SEP where there is not the appropriate oversight or due diligence, then you do end up with the imbalances in 

these risk pools. 

11 

So welcome, we look forward to the hearing, and I yield back. 

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

the ranking member of the full committee, the gentleman from 

New Jersey, 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. This will be our committee’s 10th hearing on the law, the Affordable Care Act, just this 

Congress, and while I continue to hope that my Republican colleagues will come to their senses and finally hold a hearing to work 

in a bipartisan way to improve the ACA, unfortunately once again 

this will not be that day. 

It is clear that the GOP just wants to repeal the ACA and continue to point out problems with the health care system in general 

without proposing any alternatives. And we are here today to discuss four reports on different aspects of the Affordable Care Act, 

two of which were only made available to staff and the public on 

Monday. 

Now one report by the Office of the Inspector General on the conversion of start-up loans by CO–OPs found that no wrongdoing occurred. The report simply found that the CO–OPs were in compliance with CMS guidance and accounting principles when converting start-up loans. 

Another report released by the GAO this month examines health 

insurance market concentration and competition in 2014 finding 

that enrollees tend to be concentrated among only a few issuers. 

However, since this report analyzes data collected prior to the implementation of the ACA’s insurance exchanges, it does not shed 

light on whether the exchanges have affected market concentration. 

We will also be discussing a report that is a continuation of the 

GAO’s fake shopper investigation in which GAO used fake identities and fake documents to attempt to enroll in coverage through 

the health insurance marketplaces and Medicaid. 

And let me just start by saying that I will continue to be critical 

of the way the GAO carried out this investigation. It is inconceivable to me that anyone would be skilled enough or motivated 

enough to try to fraudulently gain health insurance coverage this 

way, particularly since there is no possible scenario in which an individual could financially gain from gaming the system. 

Even if someone were to obtain health insurance with fraudulent 

information, they would still need to pay premiums and any other 

out-of-pocket costs associated with their plan to actually get medical services. Nevertheless, for the third year in a row GAO continues with this farce. They created false identities and attempted 

to enroll in coverage concluding that the system remains vulnerable to fraud. 

Republicans have translated this conclusion to mean that this 

sort of fraudulent enrollment is rampant in the marketplace, and 

I think to use this deeply flawed GAO report to try to say that people can get so-called free health insurance is utterly ridiculous. In 

fact, GAO’s fake shoppers paid premiums each month and did not 

seek any health care. This report fails to answer two very imporVerDate Nov 24 2008 15:23 May 10, 2017 Jkt 037690 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-168 CHRIS
12 

tant questions. Is this a real problem, and if it is how can we fix 

it? These are questions Democrats are interested in answering, yet 

once again GAO has not provided CMS with the information and 

the fake identities it created. This information could help the agency learn from GAO’s work and fix potential vulnerabilities in the 

systems. 

Now Democrats care about program integrity and oversight, but 

once again I suspect this hearing is not about oversight but about 

headlines. As I have already said, it seems entirely unrealistic that 

some of the most vulnerable individuals in this country would have 

the desire, time, money and expertise to fraudulently gain coverage 

the way GAO did in their study, and GAO’s lack of recommendations in this report is very disappointing. We and the Administration rely on GAO for unbiased reports and recommendations, and 

these fake shoppers provide neither. 

Now let me talk about the success of the ACA because Republicans would make you think that the health care system was better off before the ACA. We can’t forget that thanks to the ACA, the 

uninsured rate is at an all-time low, 20 million more people now 

have health coverage, and the vast majority are satisfied with their 

coverage. It is important to remember that because of the ACA, 

Americans now have access to free preventive services, kids can 

stay on their parents’ plan up to 26, and there are no lifetime or 

annual limits on coverage. Since the enactment of the ACA, the solvency of the Medicare Trust Fund has been extended for 13 years. 

In addition, unnecessary hospital readmissions in Medicare have 

fallen for the first time on record, resulting in a hundred thousand 

fewer readmissions in 2015 alone. 

The ACA’s marketplaces are new. The ACA’s consumer protections are new. As with almost every new law there will be necessary changes and adjustments, but what is different about this 

law is that we have not been able to make those changes. Instead 

of working together to make sure the law works for everyone, my 

colleagues on the other side of the aisle have tried to repeal this 

law more than 60 times and we have met resistance at every turn. 

There are absolutely ways that we can improve upon the ACA’s 

successes, expand access to affordable coverage, and reduce the 

number of uninsured. Unfortunately, no one on the Republican side 

wants to improve anything. All we hear from my colleagues on the 

other side is negativity. My colleague from Tennessee who I love 

is still talking about TennCare. I don’t know how many times I am 

going to hear about TennCare. I mean, I don’t even think 

TennCare exists anymore. If it does, it is certainly not what it was. 

And this is what we get. We just get the constant hearings, efforts to say, oh, everything is terrible, everything stinks, but whenever we have any suggestion from the—I don’t hear anything from 

the other side of the aisle other than, whatever has been proposed 

and whatever we try to do to change the system and make it better, which truly has been successful, needs to be repealed, needs 

to be thrown out without any suggestion about any alternative that 

is meaningful. 

So obviously I am not too happy with this hearing today, Mr. 

Chairman, but nonetheless—— 

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

13 

Mr. PALLONE [continuing]. You will continue. 

Mr. PITTS. The chair thanks the gentleman for his opening statement. As usual, all the members’ written opening statements will 

be made a part of the record. 

At this point I will introduce our panel. We have one panel and 

I will introduce them in the order of their presentation. First, Mr. 

Andy Slavitt, acting administrator of the Center for Medicare & 

Medicaid Services, CMS; Ms. Gloria Jarmon, deputy inspector general for Audit Services in the Office of Audit Services within the 

Office of Inspector General, U.S. Department of Health and Human 

Services; and Mr. Seto Bagdoyan, director of the Forensic Audits 

and Investigative Service for the U.S. Government Accountability 

Office. 

Thank you for coming today. We look forward to your testimony. 

Your written testimony will be made a part of the record. You will 

each be recognized for 5 minutes for a summary. You are aware 

that the committee is holding an investigative hearing, and when 

doing so has had the practice of taking testimony under oath. Do 

you have any objection to testifying under oath? 

The response is no. The chair then advises you that under the 

rules of the House and the rules of the committee you are entitled 

to be advised by counsel. Do you desire to be advised by counsel 

during your testimony today? 

The response is no. In that case, if you would please rise and 

raise your right hand, I will swear you in. 

[Witnesses sworn.] 

Mr. PITTS. The response is I do. You are now under oath and 

subject to the penalties set forth in Title 18 Section 1001 of the 

United States Code. You may now give a 5 minute summary of 

your written statement. The chair recognizes Mr. Slavitt for 5 minutes. 

STATEMENTS OF ANDY SLAVITT, ACTING ADMINISTRATOR 

FOR CENTERS FOR MEDICARE & MEDICAID SERVICES; GLORIA JARMON, DEPUTY INSPECTOR GENERAL FOR AUDIT 

SERVICES, OFFICE OF AUDIT SERVICES, OFFICE OF INSPECTOR GENERAL; AND SETO BAGDOYAN, DIRECTOR OF FORENSIC AUDITS AND INVESTIGATIVE SERVICE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

STATEMENT OF ANDY SLAVITT 

Mr. SLAVITT. Chairman Pitts and Murphy, Ranking Members 

Green and DeGette, members of the subcommittees, thank you for 

the invitation to this hearing to discuss the progress we have made 

as a country under the Affordable Care Act as well as key priorities 

for improvement. 

With the enactment of the law we’ve taken a significant step together as a nation to provide for the first time access to quality 

care to all Americans regardless of their health or financial status. 

For millions of Americans this represents the largest shift in how 

our health care system works since the creation of Medicare more 

than 50 years ago. 

As you all know well, Medicare which has lifted millions of seniors out of poverty was launched amidst great uncertainty. It has 

14 

succeeded by continually evolving to reflect the needs of our seniors, adjusting to cover prescription drugs, new modes of treatment, 

and payments which support high quality care delivery. I continue 

to appreciate Congress’ leadership on Medicare’s latest evolution, 

MACRA, and hope we can continue to work together to fulfill your 

vision of a payment program that is focused on affordable, high 

quality patient care. 

Undertaking fundamental change is rarely easy. From the outset, we knew that like Medicare the implementation of the Affordable Care Act would be a multiyear process. As we look to the 

fourth open enrollment, we are very proud of what we’ve accomplished so far. More than 20 million people now have coverage because of the law. And at 8.6 percent, the uninsured rate for Americans is the lowest on record. 

Let me turn to our priorities. First, CMS is learning from the 

early years of implementation using data and feedback to refine 

our policies to build a strong, sustainable marketplace. The recommendations and input of the GAO and OIG who have together 

conducted over 50 ACA audits have been especially valuable in our 

efforts to strengthen our processes and controls. 

In this vein we’ve made improvements to the marketplace so that 

it continues to function properly, predictably, and securely. This 

has included changes to risk sharing mechanisms, program integrity, and eligibility rules. We are targeting bad actors for using the 

marketplace inappropriately, and we have significantly increased 

compliance with documentation requirements. Our mantra is to 

continually learn and adjust. 

Second, we stand ready to work with states to expand Medicaid 

eligibility and finish the job of covering all Americans. Expanding 

Medicaid not only helps low income people gain access to care, but 

helps reduce marketplace premiums for middle income families, 

and data shows marketplace premiums are about 7 percent lower 

in states that expand Medicaid. 

Third, we know that costs are a critical consideration both for 

purchasing coverage and for taxpayers. The good news for the vast 

majority of Americans is that the Affordable Care Act offers important protections to keep coverage affordable. Even if premiums 

were to rise substantially next year, the vast majority of federal 

marketplace consumers will still be able to choose a plan for less 

than $75 per month. 

And the good news for taxpayers is that we’ve achieved these historic coverage gains at a 25 percent lower cost than the CBO originally projected. And this has also benefited newly covered Americans. Going into 2017, independent experts calculate that marketplace premiums are currently 12 to 20 percent lower than initial 

predictions. There’s no question that as a country more people are 

paying less, getting more and with greater consumer protections 

than before the ACA. 

But of course any conversation on the cost of health insurance 

is actually a conversation about the overall cost of care and the 

value that we get for the money that we spend. At CMS, access and 

affordability for the 140 million Americans we serve every day is 

critical. This is why we must work to keep medications affordable, 

prevent waste and coordinate care, and why we have a special task 

15 

force focusing on access to care in rural America, for costs and the 

lack of competition have long created concerns. 

Personally, it’s been very rewarding to serve at CMS during a 

time of so much transformation. For the vast majority of my 25 

years in health care it didn’t seem possible that we’d ever achieve 

a real reduction in the uninsured rate or see a time that having 

a preexisting condition didn’t disqualify a person from coverage. 

As the marketplace continues to grow and mature, we’ll continue 

to listen, add new capabilities and adapt to best serve American 

patients and taxpayers. Thank you and I’ll be happy to answer any 

questions. 

[The prepared statement of Andy Slavitt follows:] 

16 


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STATEMENT OF 

ANDY SLAVITT 

SUBCOMMITTEI<: ON HEALTH 

AND 

SUBCOMMITTEE OVERSIGHT & INVESTIGATIONS 

SEPTEMBER 14,2016 
17 


22696.002

U.S. House Committee on Energy & Commerce 

Subcommittee on Health 

and 

Subcommittee on Oversight & Investigations 

Hearing on 

The Affordable Care Act 

September 14,2016 

Chairmen Pitts and Murphy, Ranking Members Green and DeGette, and members of the 

Subcommittees, thank you for the invitation to discuss the Centers for Medicare & Medicaid 

Services' (CMS') continuing work to implement the Affordable Care Act and provide consumers 

with affordable access to high-quality health coverage. 

Thanks to the Affordable Care Act, Americans' access to the health insurance market has 

fundamentally transformed in only a few years. Before the Affordable Care Act, consumers 

were frequently denied health care coverage or charged exhorbitant rates if they had pre-existing 

conditions. People who managed to find insurance coverage often learned that it would not 

cover the care that they needed when they became sick-or that insurance companies could 

cancel their policies entirely. Annual or lifetime limits capped the value of coverage consumers 

had when they faced serious illness. 

Since 2014, for the first time, we have a health insurance system that is providing access to 

quality care to all Americans regardless of their health or financial status. Millions who were 

previously denied or unable to afford coverage for chronic conditions or even routine care are 

now able to get the care they need. Pre-existing conditions no longer preclude individuals from 

gaining health insurance, and consumers have better access to comprehensive, at1ordable 

coverage. Consumers now have the comfort of knowing that if their employment changes or 

they lose coverage for any reason, they can purchase affordable coverage through the 

Marketplace-regardless of their personal health history. As of earlier this year, an estimated 

20 million more people have coverage because of the law, 1 and at 8.6 percent, the uninsured rate 

1 https://aspe.hhs.gov/sites/default!tiles/pdf/1 87551/ ACA20 I 0-20 16.pdf 
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22696.003

for Americans is the lowest on record. 2 We achieved these remarkable results at a lower cost 

than the Congressional Budget Office (CBO) originally projected, with coverage provisions 

costing 25 percent less than original estimates. 3 And, despite concerns about rate increases, 

premiums charged by Exchange health plans remain well below what CBO initially 

predicted. Overall, independent experts calculate that Marketplace premiums are currently 12 

percent to 20 percent lower than CBO predicted when the Affordable Care Act was enacted.4.5 If 

rates had come in as CBO predicted, and grown with medical trend, consumers likely would pay 

more next year than they actually will, even with this year's rate changes. 

The changes the Affordable Care Act made to our health system are providing countless 

Americans with the security that comes from knowing they will have access to health care when 

they need it. At the same time, this fundamental shift-to a health insurance market that serves 

all consumers, regardless of their health history-is new for all involved-consumers, insurers, 

and state regulators, thus requiring all of us to learn from what has worked and build on these 

successes, while making refinements and adjustments when necessary. Health insurance issuers 

need to build new business models for the individual market, where they can be successful by 

providing the care people need and compete on cost and quality. 

Many health plans are meeting this challenge with a variety of innovative approaches, with the 

Marketplace serving as a laboratory for innovations and strategies that are helping us build a 

better health care system. For example, Blue Cross Blue Shield in Florida closely analyzed its 

prospective Marketplace customers and learned that those purchasing coverage in the new 

market differ significantly from the consumers they served in the individual market before the 

Affordable Care Act. Based on this research, the company was able to tailor plans to meet the 

needs of different communitities, including innovative care delivery through interdisciplinary 

teams that that focused on improving care for high-risk populations in particular 

2 http://www .cdc.gov /nchs/data/nh i s/earlyrelease/insur20 1609. pdf 3 https://www.cbo.gov/publication/51385 

4 http://kff.org/health-reform/perspective/how-aca-marketplace-premiums-measurc-up-lo-expeclations/ 

5 http://healthaftairs.orglblog/20 16/07/2 I /obamacare-premi ums-are-lower-than-you-thi n kJ 

2 
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communities. In Massachusetts, Blue Cross Blue Shield of Massachusetts is using a payment 

model that pays doctors and clinicians based on the quality, efficiency, and effectiveness of the 

care they provide. This approach is saving money while giving patients better care than similar 

patients in other states. 6 

While many issuers have adopted innovative, successful approaches to the significant changes in 

the market, it is not surprising that others have encountered more challenges. Many companies 

are adjusting their geographic coverage, provider network, care management, and pricing 

approach now that they have information about how Marketplace consumers are accessing care. 

The approaching fourth Marketplace Open Enrollment presents an opportunity to build on what 

we have learned and put the Marketplace on even stronger footing through a series of major 

outreach improvements and important policy changes. 

Building on Successes in Open Enrollment Four 

The Marketplace was designed to make it easy for individuals to comparison shop for health care 

plans that meet their needs, and research shows that the Marketplace is delivering on this 

goal. Consumers say they can now access primary care and prescription drugs they could not 

afford before the Affordable Care Act, and a majority are satisfied with their covcrage. 7 More 

than 80 percent of consumers selected plans with primary care visits covered below the 

deduetibles, and on average, nearly seven services-beyond preventive services-were covered 

below deductibles in the I IealthCare.gov states in 2015. 8 J.D. Power and Associates found that 

consumers who bought coverage through the Marketplace in 2015 generally were more satisfied 

than those with other types of insurance, including employer coverage. 9 

6 http://www.nejm.org/doi/full/1 0.1056/NEJMsa 1404026 7 http://www.commonwealthfund.org/publications/issue-briefs/2016/may/aca-tracking-survey-access-to-care-andsatistaction 

8 https://www.cms. gov IN ewsroom/MediaReleaseDatabase/Fact -sheets/20 16-F act-sheets-items/20 16-07-12 .html 9 http://www. jdpower .com/press-releases/20 15-health-insurance-marketplace-exchange-shoppcr-and-re-enro llmenthix-study 

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Nonetheless, we know that premium increases are a challenge for families. Fortunately, as the 

market adjusts, the Marketplace is designed to insulate most consumers from large rate 

increases. As a result of financial assistance and the ability to shop around, the vast majority of 

HealthCare.gov consumers could still choose plans for less than $75 per month even if all plan 

premiums rose substantially next year. 10 Premium changes typically vary from issuer to issuer 

and even across plans offered by the same issuer, so the lowest-priced plan one year may not be 

the lowest-priced plan the next year. 

CMS is hard at work preparing for the fourth Marketplace Open Enrollment, beginning on 

November 1. Earlier this year, we finalized several policy changes and enhancements, 11 

including provisions to: ( 1) help consumers with surprise out-of-network costs at in-network 

facilities; (2) provide consumers with notifications when a provider network changes; (3) give 

insurance companies the option to offer plans with standardized cost-sharing structures called 

"simple choice plans"; and ( 4) in a pilot program, provide a rating on HealthCare.gov of each 

Qualified Health Plan's relative network breadth (for example, "basic," "standard,'' or "broad") 

or quality rating to support more informed consumer decision-making. 

We have learned more about what kinds of outreach are most effective as we seek to reach out to 

the remaining Americans who are uninsured and eligible to enroll in Marketplace coverage. Our 

outreach efforts will put a special emphasis on communicating with those Americans who paid 

the Individual Shared Responsibility Payment for 2015 and on facilitating 26-year-olds' 

transitions from their parents' plans to Marketplace coverage. 

We are making it easier for issuers to conduct outreach to young adults moving off their parents' 

plans. Specifically, new guidance from the Department of Labor makes clear that the sponsors 

of employer plans can- and are encouraged to- provide additional information that will help 

young adults understand their options and enroll in Marketplace coverage as appropriate. Along 

with issuing new policy guidance, we are strongly encouraging insurers to contact these 

consumers with targeted information about Marketplace options. 

10 https://aspe.hhs.gov/sites/default/files/pdf/2067 41/ APTCMarketplace.pdf 11 https://www. federalregister.gov /arti cl es/20 !6/03/08/20 !6-044 39/patient -protection -and-affordable-care-act -hhsnotice-of~bene fit -and-payment-parameters-for-201 7 

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We also are undertaking smarter, more timely, and targeted email and other outreach 

campaigns. These efforts will complement our successful in-person outreach and assistance 

programs. Research during the 2016 Open Enrollment showed that young adults are almost 

twice as likely as older consumers to enroll when they receive an email about Marketplace 

coverage. During the upcoming Open Enrollment, we will draw on lessons learned this year 

about the ways to make email outreach more effective. 

Additionally, this year we will be able to email consumers with important proactive reminders in 

near-to-real time if they open accounts to start applying or finish applications to select plans, and 

we will send each consumer a reminder after selecting a plan to pay their first premiums as the 

last step to gaining coverage. We've learned that sending an email with the right information, at 

just the right time, can make a significant difference in whether someone gets covered, and those 

are lessons we will act on this year. 

Policy Changes to Build a Strong Marketplace for the Long-Term 

CMS is committed to building a stable, sustainable Marketplace that serves consumers for years 

to come. One of the most significant things CMS is doing is making adjustments and 

refinements along the way. With the benefit of three years of data and experiences to analyze 

and inform our policies, CMS has proposed or taken a number of actions to: (I) better reflect the 

risk associated with high-cost enrollees; (2) better reflect the risk associated with enrollees who 

are not enrolled for a full 12 months; (3) strengthen the risk pool; and (4) support issuers in 

entering the Marketplace and in growing their Marketplace businesses. These actions, coupled 

with other related improvements already underway, will help to make the Martketplace an even 

more attractive market for consumers and health plans alike. 

Supporting Issuers with High-Cost Enrollees and Updating Risk Adjustment 

One of the core tenets of the Affordable Care Act has been that people with pre-existing 

conditions finally have access to the coverage they need. The law's risk-adjustment program 

plays an important role in providing issuers both the incentives and the financial support to 

design products to serve all Americans. By reducing incentives for issuers to design products 

5 
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that attract a disproportionately healthy risk pool, risk adjustment lets them design products that 

meet the needs of all consumers, protecting consumers' access to a range of robust options. 

Based on significant input from all marketplace participants, earlier this year, CMS made a 

number of changes to improve the stability, predictability, and accuracy of the risk-adjustment 

program for issuers. These changes include better modeling of costs for preventive services, 

changes to the data update schedule, and earlier reporting of preliminary risk-adjustment data 

where available. CMS also recently proposed additional changes in the Proposed Notice of 

Benefit and Payment Parameters for 2018. 12 We are seeking comment on a number of 

approaches for addressing the costs of healthier enrollees. Our goal is to update risk-adjustment 

for all types of enrollees, to ensure that issuers can have confidence in the program as they 

design products to attract all types of consumers. These proposals could help to bring more 

certainty into the Marketplace, helping issuers account for the risk of all enrollees, while 

continuing to ensure that all Americans have access to the care they need. 

Strengthening the Marketplace Risk Pool 

Along with helping issuers cover enrollees with more serious health needs, we also recognize the 

importance of balancing the mix of enrollees in the Marketplace risk pool. CMS has undertaken 

a variety of efforts to help strengthen the risk pool, and is seeking comment on several additional 

proposed improvements. 

Special enrollment periods (SEPs) exist to ensure that people who lose coverage or experience 

other qualifying events have the opportunity to enroll in coverage. We are committed to making 

sure that SEPs are available to those who are eligible and are equally committed to avoiding any 

misuse or abuse ofSEPs. In 2016, we took a number of steps to ensure appropriate use ofSEPs, 

such as introducing a confirmation process under which consumers enrolling through common 

12 https://www. fcderalregister.gov /articles/20 16/09/06/20 16-20896/patient -protection-and-affordable-care-act -hhsnoti ce-o f-bencfit-and-payment -parameters-tor-20 I 8 

6 
23 


22696.008

SEPs are directed to provide documentation to confirm their eligibility. 13•

14 Recently, we 

announced that we are planning a pilot to evaluate a pre-enrollment verification process. 15 Our 

intent in conducting such a pilot would be to evaluate the impact of pre-enrollment verification 

of SEP eligibility on compliance, enrollment, continuity of coverage, the risk pool, and other 

outcomes. We continue to seek information on additional steps related to SEP outreach or policy 

we could take as soon as the 2017 plan year to strengthen the risk pool. 

CMS also is reaching out to the small number of consumers enrolled in both Medicare and 

Health Insurance Marketplace coverage with financial assistance. We are doing this to make sure 

they end their Marketplace coverage with advance payments of the premium tax credit because 

they are receiving Minimum Essential Coverage (MEC) Medicare, and thus are not eligible for 

this financial assistance. In March 2016, we also added a pop-up to the Marketplace application 

with information about Medicare for Marketplace applicants aged 64 and over, to increase 

consumer awareness and understanding of the rules regarding Medicare enrollment and 

eligibility for Marketplace coverage. In summer 2016, CMS began sending email notices to 

existing Marketplace consumers who will turn age 65 the following month. This notice helps 

educate consumers about the eligibility rules pertaining to Medicare and Marketplace coverage 

with financial assistance and potential tax liability, and provides instructions on how and when to 

end a Marketplace plan with this assistance due to Medicare enrollment. 

CMS is seeking information regarding concerns that some health care providers or third party 

entities may be inappropriately steering their Medicare and Medicaid patients into the individual 

market in order to receive higher reimbursement rates. 16 CMS's request for information and 

letters to providers informing them of this announcement focus on situations where patients may 

be steered away from Medicare or Medicaid benefits, which can, among other concerns, result in 

13 For more infOrmation on SEPs, visit https://www.healthcare.gov/coverage~outside~open~enrollmentlspccialenrollment-period/ 

14 See https://blog.cms.gov/20 16/01 119/clarifying-eliminating-and-enforcing-special-enrollment-periods/ and 

https://www.cms.gov/Newsroom/MediaReleaseDatabasc/Fact-sheets/2016-Fact-sheets-items/2016-02-24.html 

15 https://www .ems. gov /CCII 0/Resources/Regulations-and-Guidance/Down loads/FAQ-Regarding-Veri fieation-o fSEPs.pdf 

16 https:/ /www .ems. gov IN ewsroom/M ediaReleaseDatabase/Press-rcleases/20 16-Press-releases-items/20 16-08-1 8-

2.html 

7 
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22696.009

beneficiaries experiencing disruptions in the continuity and coordination of their care as a result 

of changes to their network of providers. These actions reflect ongoing efforts by CMS to 

address possible issues in the Marketplace that could affect the integrity of the programs for both 

consumers and issuers, and the costs of the individual insurance coverage, while at the same time 

help ensure patients are enrolled in the right plan for them. CMS also is seeking comments on a 

coordination of benefits policy that similarly is intended to ensure individuals entitled to 

Medicare and Medicaid are appropriately enrolled in those programs. 17 

Removing Obstacles to Issuer Entrance, Growth, and Innovation 

As we look forward, it is clear that the issuers that will be most successful in the long term are 

likely to be those with innovative approaches to this new Marketplace and its consumers. CMS 

recently proposed new policies that would give issuers additional flexibility and freedom to offer 

innovative products and to remove obstacles to issuers growing their businesses and entering 

more markets. 18 For example, CMS proposed more flexibility for innovation around plan design 

by issuers, particularly around bronze plan offerings, while still protecting the coverage on which 

consumers rely. This proposal is intended to help ensure that issuers can offer bronze plans with 

at least one major service before the deductible, as well as offer high-deductible health 

plans (that can be paired with health savings accounts) at the bronze level of 

coverage. Enrollment data from the Federally-facilitated Marketplaces shows that consumers 

prefer plans that cover and pay for services below the deductibles. 

We also have included proposals to give new and growing issuers more flexibility in calculating 

their medical loss ratios to be more accurately reflective of their experience, and to avoid 

instances where issuers who are adjusting their individual market or group market portfolios 

would inadvertently trigger bans on participating in the individual or group market. These 

measures generally would promote stability in the individual and small group markets, and 

would encourage issuers to enter or stay in the Marketplaces. 

17 https:/ /www. federalregi ster.gov /articles/20 16/09/06/20 16-20896/paticnt -protection-and-affordable-care-act -hhsnoticc-of~benefit-and-oayment-parameters-for-20 18 1

' https://www. federal register .gov /articlcs/20 16/09/06/2016-20896/patient -protection-and-affordable-care-act-hhsnotice-o f-bencfit -and-payment -parameters-for-20 18 

8 
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Moving Forward 

Thanks to the Affordable Care Act, our country's health-insurance system has transformed from 

one that too often excluded the sick to a system that guarantees access to care for all, regardless 

of health status. This type of fundamental change rarely is easy, and from the outset, we knew 

that implementation of the Affordable Care Act would be a multi-year process. Every day we 

learn more to help us improve our operations and enhance the consumer experience by making 

the purchasing of health insurance easier and simpler for our customers. 

As the Marketplace continues to grow and mature, our most important priorities include studying 

data, listening to a range of market participants, testing different approaches, and adapting to 

what we sec and hear. We have a number of tools to make adjustments and are confident in our 

ability to make the Marketplace an even more attractive market for consumers and health plans 

alike. We look forward to continuing to benefit from suggestions from customers, assisters, 

brokers, issuers, and other key stakeholders on ways to improve our operations to ensure the 

American people gain the peace of mind that comes with health insurance coverage. 

9 
26 

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

Ms. Jarmon 5 minutes for your summary. 

STATEMENT OF GLORIA JARMON 

Ms. JARMON. Good morning, Chairman Pitts and Murphy, and 

Ranking Members Green and DeGette, and other members of the 

subcommittee. Thank you for the opportunity to testify today about 

the Office of Inspector General’s oversight of health insurance marketplaces. As part of our strategic plan to oversee implementation 

of the Affordable Care Act, we have completed a significant body 

of audits and evaluations addressing federal and state marketplaces and other ACA provisions. 

Our marketplace oversight work focuses on payment accuracy, 

eligibility systems, management and administration, and security 

and data of systems. My testimony today focuses on our most recent work which is the Consumer Operated and Oriented Plans, or 

CO–OPs, and state marketplaces. 

Regarding our CO–OP work, we recently looked at the conversion 

of start-up loans into surplus notes. These notes are bond-like instruments issued to provide capital. We conducted this review to 

assess whether the CO–OPs complied with the Centers for Medicare & Medicaid Services guidance and applicable accounting principles. 

We found that the CO–OPs generally complied with this guidance and applicable accounting principles when converting start-up 

loans into surplus notes. However, CMS did not adequately document the potential impact of the conversions on the federal government’s ability to recover the loan payments if the CO–OPs were to 

fail. 

Based on our findings, we recommended that CMS improve the 

decision making process for any future conversions of start-up 

loans to surplus notes, and document any potential negative impact 

from changes in distribution priority, and to quantify the likely impact on the federal government’s ability to recover loan payments. 

Following up on these recommendations, we are currently reassessing the CO–OPs’ financial condition to determine if any improvements were made in 2015 and 2016. We are also monitoring 

the actions made by CMS to address underperforming CO–OPs. 

This work is expected to be issued during fiscal year 2017. 

Regarding our state marketplaces work we recently completed a 

series of reviews to determine whether marketplaces had effective 

internal controls in place to ensure that individuals signing up for 

health insurance and receiving financial assistance through insurance affordability programs are eligible. We reviewed the first open 

enrollment period at seven state marketplaces. We found certain 

internal controls were effective. However, most of the state marketplaces had some ineffective internal controls for ensuring that individuals were enrolled in a qualified health plan in accordance with 

federal requirements. 

With respect to establishment grant funds, we are in the process 

of completing a series of state marketplace reviews and their use 

of these funds. This work primarily focuses on whether marketplaces allocated costs to their establishment grants in accordance 

with federal requirements. Recently issued reports have deterVerDate Nov 24 2008 15:23 May 10, 2017 Jkt 037690 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-168 CHRIS
27 

mined that some states reviewed used allocation percentages based 

on outdated estimated enrollment data instead of updated data 

that was available. Based on these findings we recommended that 

the states refund misallocated amounts or work with CMS to resolve the misallocated amounts. 

With respect to privacy and security of state marketplaces we 

have completed reviews of data and system security at five states 

and are close to completing reviews of two others. All of the states 

for which we have completed reviews have implemented some security controls to protect personally identifiable information or PII. 

However, vulnerabilities existed in those states and each had at 

least one vulnerability that if exploited could have exposed PII and 

other sensitive information. States generally agreed with our recommendations to improve security, and in many instances reported 

taking action to correct identified vulnerabilities. 

In closing, we appreciate the committee’s interest in this important issue and continue to urge CMS to fully address our recommendations related to improving oversight and financial solvency of the CO–OP program and state marketplaces. OIG is committed to providing continued oversight of these programs to help 

ensure that they operate efficiently, effectively and economically. 

This concludes my testimony. I would be happy to answer your 

questions. 

[The prepared statement of Gloria Jarmon follows:] 

28 


22696.011
29 


22696.012

Testimony of: 

Gloria L. Jarmon 

Deputy Inspector General for Audit Services 

Office of Inspector General, U.S. Department of Health and Human Services 

Good morning, Chairman Pitts, Chairman Murphy, Ranking Members Green and DeGette, and 

members of the Subcommittees. I am Gloria Jarmon, Deputy Inspector General for Audit 

Services for the Office of Inspector General (OJG), U.S. Department of Health and Human 

Services (HHS). Thank you for the opportunity to appear before you today to discuss OIG's 

oversight of health insurance marketplaces. 

The Patient Protection and Afiordable Care Act (ACA) established health insurance exchanges 

(commonly referred to as "marketplaces") to allow individuals and small businesses to shop for 

health insurance in all 50 States and the District of Columbia. States can choose to operate their 

own State marketplaces. Thirteen States (including the District of Columbia) are operating their 

own State marketplaces. The ACA provided funding assistance to States for planning and 

establishing State marketplaces. 

OJG has identified oversight and operation of the health insurance marketplaces as a Top 

Management Challenge for HHS. OIG has completed a significant body of audits and 

evaluations regarding the Federal and State marketplaces and other ACA provisions of high 

interest and concern to the Department, Congress, and other stakeholders and plans more work in 

this area. OIG's marketplace oversight strategy focuses on four areas that we have determined to 

be most critical: payment accuracy, eligibility systems, management and administration, and 

security of data and systems. (See the Attachment for a list ofOIG's completed ACA work 

related to the marketplaces.) 

Today, I will discuss the Consumer Operated and Oriented Plan (CO-OP) program and the State 

marketplaces, but I would like to note that OIG has performed multiple reviews related to the 

operations of the Federal marketplace, including reviews related to (I) systems for determining 

consumers' eligibility for qualified health plans and insurance affordability programs, (2) 

enrollment, (3) advance premium tax credits for individuals enrolled in qualified health plans, (4) 

the security of marketplace data and information technology (IT) systems, and (5) contracting. 

OJG's Oversight of the CO-OP Program 

The ACA established the CO-OP program to foster the creation of nonprofit health insurance 

issuers to offer qualified health plans. The ACA authorized the Secretary of HHS to provide 

startup and solvency loans to help establish CO-OPs. Startup loans were intended to help 

CO-OPs cover approved costs for beginning operations. CMS has awarded $2.44 billion to 23 

CO-OPs, of which $358 million was for startup loans; the remaining $2.08 billion was for 

solvency loans. The startup loans were originally treated as debt that each CO-OP was expected 

to repay within 5 years of the disbursement. Solvency loans were structured to comply with 

applicable State insurance laws to meet capital reserve requirements and were expected to be 

repaid within 15 years. State insurance regulators require insurance issuers to maintain specified 

levels of capital reserves to continue to conduct business. 

2 
30 


22696.013

OIG's past work related to the CO-OP loan program examined the Centers for Medicare and 

Medicaid Services' (CMS) selection process for awarding financial loans to CO-OPs, early 

implementation of the loan program, and the financial solvency of the CO-OPs. On the basis of 

that work, we concluded that CMS awarded CO-OP loans in accordance with applicable Federal 

requirements, but we also identified several risks that indicated a critical need for additional 

CMS oversight of the CO-OPs as they prepared to become operational. For instance, we 

identified a risk that CO-OPs could exhaust all startup loan funding before they became fully 

operational or before they earned sufficient operating income to be self-supporting. We also 

found that after becoming operational, most CO-OPs had lower-than-expected enrollment 

numbers and significant net losses and that these factors might limit some CO-OPs' ability to 

repay loans. We made recommendations to CMS to improve its oversight of the loans and of the 

financial solvency of the C0-0Ps. 1 Twelve of the original23 CO-OPs had closed as of 

December 31,2015. After issuance of our reports, 4 additional CO-OPs closed (as of August 31, 

2016), leaving only 7 of the original23 CO-OPs in business. 

In my testimony today, I will focus on OIG's most recent work, which examines the CO-OPs' 

conversion of startup loans into surplus notes (a bond-like instrument issued to provide needed 

capital). On July 9, 2015, CMS issued a memo to the CO-OPs that provided guidance to allow 

the CO-OPs to amend their startup loan agreements. According to the guidance, the amendments 

would allow CO-OPs to convert startup loans into surplus notes. Under the terms of a surplus 

note, CO-OPs are not required to make any repayment on a surplus note that could lead to 

financial distress or default. Loan conversions were intended to improve capital levels and to 

meet the 500-percent risk-based capital (RBC) requirements generally imposed by CMS, which 

represented the minimum amount of capital needed to support the CO-OP's business operations.2 

In accordance with National Association oflnsurance Commissioners accounting principles, 

CO-OPs that converted their startup loans into surplus notes could record and report these loans 

as capital and surplus rather than as debt in financial filings with regulators. 

In August 2016, OIG issued a report examining CMS's oversight and approval of CO-OPs' 

conversions of startup loans into surplus notes.3 This work stemmed from a hearing entitled 

"Examining the Costly Failures ofObamacare's CO-OP Insurance Loans" held before the United 

States House Committee on Energy & Commerce, Subcommittee on Oversight & Investigations, 

on November 5, 2015. The hearing addressed financial challenges that CO-OPs faced and the 

effects on consumers and taxpayers. During the hearing, members expressed interest in OIG 

auditing the conversions of startup loans to surplus notes. 

OIG determined that the 12 CO-OPs that converted startup loans to surplus notes on or before 

December 31, 20 I 5, complied with CMS guidance and applicable accounting principles when 

1 Earlv implementation oft he Consumer Operated and Oriented Plan Loan Program: The Centers (or A-fedicare & 

Aledicaid Services Alvarded Consumer Operated and Oriented Plan Program Loans in Accordance with Federal 

Requirements. and Continued Oversight Is Needed· Actual Enrollment and Profitabilitv Was Lmver Than 

Projections Made by the Consumer Operated and Oriented Plans and Might Affect Their Ability To Repav Loans 

Provided Under the Affordable Care Act 2 On the basis of a health insurance issuer's size and risk, RBC estimates the minimum amount of capital needed to 

support the issuer's business operations. Issuers with a higher level of risk must reserve a larger amount of capital. 

RBC is usually expressed as a percentage. CMS generally required CO-OPs to maintain an RBC of 500 percent but 

allowed for lower levels to increase the long-term sustainability of some CO-OPs. 3 Conversions of5)tartup Loans Into Surplus Notes bv Consumer Operated and Oriented Plans Were Allowable hut 

Not Alwavs Effective. 

3 
31 


22696.014

converting startup loans into surplus notes. However, CMS did not adequately document the 

potential impact of the conversions on the Federal Government's ability to recover the loan 

payments if the CO-OPs were to fail. Although the conversions provided increased levels of 

capital and surplus, 4 ofthe 12 CO-OPs approved for conversions ceased operations within 6 

months of the conversion. Despite the conversions allowing CO-OPs to record the startup loans 

as capital and surplus instead of debt, RBC percentages were at levels below the CMS 

requirement of 500 percent for four of the eight operational CO-OPs as of December 31, 2015. 

On the basis of these findings, OIG made two recommendations to CMS to improve the 

decision-making process for any future conversions of startup loans to surplus notes: to 

document any potential negative impact from changes in distribution priority and to quantify the 

likely impact on the Federal Government's ability to recover loan payments. 

We are reassessing the CO-OPs' financial condition to determine whether any improvements 

were made in 2015 and 2016, and to monitor actions by CMS to address underperforming COOPs. That work is expected to be issued during fiscal year 2017. We continue to keep abreast of 

emerging issues related to the CO-OP program and will determine whether additional oversight 

is warranted. 

CMS's Oversight of State Marketplaces 

OIG's work has covered various aspects of State marketplace operations, such as enrollment 

services and eligibility determinations, States' usc of establishment grant funds, and security of 

the marketplaces' data and systems. 

Enrollment and Eligibility 

OIG recently completed a series of reviews to determine whether State marketplaces had 

effective internal controls in place to ensure that individuals signing up for health insurance and 

receiving financial assistance through insurance affordability programs arc eligible to do so. 

OIG reviewed the first open enrollment period (October 2013 through March 2014) at seven 

State markctplaces4 and assessed internal controls over three broad areas: (1) verifying 

applicants' identity, (2) determining applicants' eligibility for enrollment in a qualified health 

plan and eligibility for insurance affordability programs, and (3) maintaining and updating 

eligibility and enrollment data. 

On the basis of our reviews of sampled applicants at the State marketplaces, we determined that 

certain internal controls were effective at the State marketplaces. These included internal 

controls for verifying applicants' incarceration status, verifying changes reported by enrollees 

that affect their eligibility, and maintaining applicant data and documentation related to resolving 

inconsistencies. However, we found that most of the State marketplaces had some ineffective 

internal controls for ensuring that individuals were enrolled in a qualified health plan in 

accordance with Federal requirements. Examples of ineffective internal controls included 

deficiencies in performing identity-proofing verification, appropriately calculating and verifying 

applicants' annual household income, verifying applicants' eligibility for minimum essential 

4 The seven State Marketplaces we reviewed were Colorado, District of Columbia, Kentucky, Minnesota, New 

York, Vermont, and Washington. In addition, OIG prior work included separate reviews at California and 

Connecticut. 

4 
32 


22696.015

coverage through employer-sponsored insurance, and resolving inconsistencies in applicants' 

eligibility data. OIG made a number of recommendations to the State marketplaces for 

implementing specific procedures to better ensure that eligibility determinations are accurate and 

performed in accordance with Federal requirements. OIG also recommended in some instances 

that a State marketplace redetermine the eligibility of sample applicants on the basis of our audit 

findings. We plan to assess CMS's oversight of the seven State-based marketplaces. 

States' Use of Establishment Grant Funds 

The ACA provided $5 billion in funding assistance to the States for the planning and 

establishment of marketplaces/ but grants had to be awarded before January 1, 2015; after 

January I, 2015, marketplaces were required to be self-sustaining, meaning they could not use 

grant funds for operational purposes. CMS also provided guidance stating that after January l, 

2015, these Federal funds may not be used to cover maintenance and operating costs, which 

include rent, software maintenance, telecommunications, utilities, and base operational personnel 

and contractors. 

In planning and establishing the marketplaces, States could use establishment grant funds for a 

variety of activities, including those that could benefit multiple State health programs. 

Accordingly, CMS's Funding Opportunity Announcements and subsequent grant award terms 

and conditions required marketplaces to allocate shared costs among Medicaid, the Children's 

Health Insurance Program, and qualified health plans consistent with Federal cost principles.6 

OIG is completing a series of reviews ofCMS establishment grants at eight State marketplaces 

across the Nation. 7 This work covers the period from the inception of the marketplace through 

December 31, 2014, and has primarily focused on whether marketplaces allocated costs to their 

establishment grants in accordance with Federal requirements. As of today, we have issued three 

reports on State marketplace establishment grants.8 OIG reported that two of these States did not 

properly allocate costs for establishing a health insurance marketplace to their establishment 

grants in accordance with Federal requirements. These States used allocation percentages based 

on outdated, estimated enrollment data instead of the updated, better data that were available. 

We made recommendations to the States to refund to CMS misallocated amounts or work with 

CMS to resolve the amounts misallocated to the establishment grants. 

In addition to reporting problems with the allocation of costs, OIG raised concerns about the 

level of detail in CMS's guidance regarding the types of operational costs that State marketplaces 

would not be able to charge against the Federal establishment grant after January I, 2015. In 

5 CMS provided several different funding opportunities to States, including early innovator cooperative agreements, 

planning and establishment grants, and establishment cooperative agreements. 

2 CFR part 225. 7 Colorado, District of Columbia, Kentucky, Maryland, Minnesota. New York, Nevada, and Vermont. 8 Nevada Misallocated Costs (or Establishing a Health Insurance Marketplace to Its Establishment Grants. The 

District of Columbia Claimed Allocated Costs to Its Establishment Grants in Accordance With Federal 

Requirements, and Maryland Misa/located Millions to Establishment Grants (or a Health Insurance Marketplace. 

5 
33 


22696.016

April2015, OIG issued an early alert9 to CMS, encouraging it to provide more specific guidance 

to State marketplaces about what it considered to be operating costs. OIG stated that without 

detailed guidance, State marketplaces might have used, and might continue to use, establishment 

grant funds for operating expenses after January I, 2015, contrary to law. In response to the OIG 

early alert, in June 2015 CMS updated and issued revised guidance 10 that provided examples of 

allowable activities (e.g., outreach, education, and stabilizing marketplace IT systems) for which 

States could use establishment grant funds after January I, 2015. The revised guidance further 

clarified the kinds of costs that CMS considered unallowable (e.g., rent, hardware/software 

maintenance, telecommunications, and utilities) because they were related to ongoing operations. 

OIG has not independently assessed the effectiveness of CMS guidance in ensuring that 

establishment grant funds were not used for operating costs after January 1, 2015. As part of our 

oversight of State marketplaces' usc of establishment grant funds, we are considering additional 

work related to marketplace operational expenses incurred after January 1, 2015, and CMS's 

activities to prevent and detect use of establishment grant funds for unallowable purposes. 

Data and 5ystems Security 

Because the State marketplaces handle consumers' personally identifiable information (Pll), OIG 

identified the security of the marketplaces' data and systems as a critical oversight area. CMS 

requires that marketplaces follow Federal IT security standards and additional requirements, 

including standards related to (1) monitoring, periodically assessing, and updating security 

controls and (2) developing and using secure electronic interfaces. 

To date, we have completed reviews of data and systems security in five States and are close to 

completing reviews of two others. 11 All States for which we have completed reviews 

implemented some security controls to protect PII; however, vulnerabilities existed in those 

States, and each had at least one vulnerability that, if exploited, could have exposed PII and other 

sensitive information. Multiple States had weaknesses in patch and vulnerability management 

and failed to conduct required periodic penetration testing, which is an authorized attempt to 

locate and exploit vulnerabilities. Without an annual external network penetration test, a State 

cannot ensure that adequate controls are in place to defend against external threats that could 

result in unauthorized access to consumer PII and sensitive system information. States generally 

agreed with our recommendations to improve security and in many instances reported that they 

took immediate action to correct vulnerabilities identified by OIG. 

Conclusion 

OIG is committed to continued oversight of the Federal and State marketplaces and related 

programs to help ensure that they operate efficiently, effectively, and economically. Given the 

magnitude and complexity of these programs, close oversight is essential. OIG has a substantial 

body of work underway and planned to ensure that taxpayer dollars are spent for their intended 

9 Em·lv Alert: Without Clearer Guidance, 1\1arketplaces ,\Jight Use Federal Funding Assistance for Operational 

Costs When Prohibited hv Law. 1

° FAQs on the Clarification of the Use of 1311 Funds for Establishment Activities (June 8, 2015). 11 We have completed reviews of California, Colorado, Kentucky, New Mexico, and Washington and are close to 

completing reviews of Minnesota and New York. 

6 
34 


22696.017

purposes in a system that operates efficiently and is secure. Our ongoing and planned 

marketplace work will examine critical issues, such as payment accuracy, eligibility systems, 

management and administration, and security of data and systems. We will continue to make 

recommendations for improvements, as appropriate, and follow up, as necessary, with CMS and 

States to encourage prompt implementation of our recommendations. 

Thank you, again, for inviting OIG to speak with the Subcommittees today. We hope that our 

work and this testimony will assist you in your oversight efforts. 

7 
35 


22696.018

ATTACHMENT: RELATED OFFICE OF INSPECTOR GENERAL 

REPORTS 

Report Title Report Number Date Issued 

Payment Accuracy 

Conversions of Startup Loans Into Surplus Notes by Consumer 

Operated and Oriented Plans Were Allowable but Not Always A -05-16-00019 08/04/2016 

Effective 

Nevada Misallocated Costs for Establishing a Health A -09-14-0 1 007 02/17/2016 Insurance Marketplace to Its Establishment Grants 

CMS Could Not Effectively Ensure That Advance Premium 

Tax Credit Payments Made Under the Affordable Care Act A -02-14-02025 12/31/2015 

Were Only for Enrollees Who Paid Their Premiums 

The District of Columbia Claimed Allocated Costs to Its 

Establishment Grants in Accordance With Federal A-03-14-03300 11/04/2015 

Requirements 

Actual Enrollment and Profitability Was Lower Than 

Projections Made by the Consumer Operated and Oriented A-05-14-00055 07/29/2015 Plans and Might Affect Their Ability to Repay Loans Provided 

Under the Affordable Care Act 

CMS 's Internal Controls Did Not Effectively Ensure the 

Accuracy of Aggregate Financial Assistance Payments Made A -02-14-02006 06116/2015 to Qualified Health Plan Issuers Under the Affordable Care 

Act 

Early Alert: Without Clearer Guidance, Marketplaces Might 

Use Federal Funding Assistance for Operational Costs When A-0 1-14-02509 04/27/2015 

Prohibited by Law 

Review of the Accounting Structure Used for the OE1-06-14-00590 03/3112015 Administration of Premium Tax Credits 

Maryland Misallocated Millions to Establishment Grants for a A-0 1-14-02503 03/26/2015 Health Insurance Marketplace 

The Centers for Medicare and Medicaid Services Awarded 

Consumer Operated and Oriented Plan Program Loans in A-05-12-00043 07/30/2013 Accordance With Federal Requirements, and Continued 

Oversight Is Needed 

Early Implementation of/he Consumer Operated and Orien/ed OEI-01-12-00290 06/l6/2013 Plan Loan Prowam 

Eligibility Systems 

Not All of/he Vermonl Marketplace's Infernal Controls Were 

Effective in Ensuring That Individuals Were Enrolled in A-()1-14-02507 03/09/20!6 

Oualifled Health Plans According to Federal Requirements 

Not All of the District of Columbia Marketplace's Internal 

Controls Were Effective in Ensuring That Individuals Were A-03-!4-0330 1 02/22//20 !6 Enrolled in Qualified Health Plans According to Federal 

Requirements 

8 
36 


22696.019

Report Title Report Number Date Issued 

Eligibiliiv Systems- continued 

Not All of the Minnesota Marketplace's Internal Controls 

Were Effective in Ensuring That Individuals Were Enrolled in A-05-14-00043 02112/2016 

Ouali{ied Health Plans Accordingto Federal Requirements 

Not All of the Washington Marketplace's Internal Controls 

Were Effective in Ensuring That Individuals Were Enrolled in A -09-14-0 1 006 01/19/2016 

Qualified Health Plans According to Federal Requirements 

Not All of the Colorado Marketplace's Internal Controls Were 

Effective in Ensuring That Individuals Were Enrolled in A-07-14-03199 12/28/2015 

Qualified Health Plans According to Federal Requirements 

The Kentucky Marketplace's Internal Controls Were Generally 

Ejfoctive in Ensuring That Individuals Were Enrolled in A-04-14-08036 10/14/2015 

Qualified Health Plans According to Federal Requirements 

Not All Internal Controls Implemented by the New York 

Marketplace Were Effective in Ensuring That Individuals Were A-02-14-02020 09/2112015 Enrolled in Qualified Health Plans According to Federal 

Requirements 

Not All of the Federally Facilitated Marketplace's Internal 

Controls Were Effective in Ensuring That Individuals Were A-09-14-01011 08/06/2015 Properly Determined Eligible for Qualified Health Plans and 

Insurance Ajjordability Programs 

Marketplaces Faced Early Challenges Resolving OEI-0 1-14-00180 07/02/2014 Inconsistencies With Applicant Data 

Not All Internal Controls Implemented by the Federal, 

California, and Connecticut Marketplaces Were Effective in A-09-14-0 I 000 06/30/2014 Ensuring That Individuals Were Enrolled in Qualified Health 

Plans According to Federal Requirements 

Management and Administration 

HealthCare.gov: Case Study ofCMS Management of the OEI-06-14-00350 02/22/2016 Federal Marketplace 

CMS Did Not IdentifY All Federal Marketplace Contract Costs 

and Did Not Properly Validate the Amount To Withhold for A-03-14-03002 09/18/2015 Defect Resolution on the Principal Federal Marketplace 

Contract 

CMS Did Not Always Manage and Oversee Contractor 

Performance for the Federal Marketplace as Required by A -03-14-0300 1 09/14/2015 

Federal Requirements and Contract Terms 

Federal Marketplace: Inadequacies in Contract Planning and OEI-03-14-00230 01/20/2015 Procurement 

An Overview of60 Contracts That Contributed to the OEI -03-14-00231 08/26/2014 Development and Operation of the Federal Marketplace 

9 
37 


22696.020

Report Title Report Number Date Issued 

Security of Data and Systems 

Public Summary Report: Washington State Implemented 

Security Controls Over the Web Site and Database for Its A-09-15-03005 06/01/2016 Health Insurance Exchange but Could Improve Protection of 

Personally Identifiable Information 

Public Summary Report: Connect for Health Colorado 

Generally Protected Personally Identifiable Information on Its A-07-15-00454 02/10/2016 Health Insurance Exchange Web Sites and Databases but 

Could Continue To Improve Information Security Controls 

The Centers for Medicare and Medicaid Services' 

Implementation of Security Controls Over the A-06-14-00067 09/21/2015 Multidimensional Insurance Data Analytics System Needs 

Improvement 

California Implemented Security Controls Over the Web Site 

and Databases for Its Health Insurance Exchange but Could A-09-14-03005 04/30/2015 

Improve Protection of Personally Identifiable ]~formation 

Health Insurance Marketplaces Generally Protected 

Personally Identifiable Information but Could Improve A-18-14-30011 09/22/2014 

Certain Information Security Controls 

Observations Noted During the OIG Review ofCMS's 

Implementation of the Health Insurance Exchange-Data A-18-13-30070 08/02/2013 

Services Hub 

10 
38 

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

Mr. Seto Bagdoyan 5 minutes for your opening statement summary. 

STATEMENT OF SETO BAGDOYAN 

Mr. BAGDOYAN. Thank you and good morning, Chairman Pitts 

and Murphy, Ranking Members Green and DeGette, and members 

of the subcommittees. I’m pleased to be here today to discuss three 

recently issued GAO reports on health care issues. 

This morning at the subcommittee’s request I’ll focus my remarks on the results of undercover testing of enrollment processes 

and related controls used by the federal marketplace and the California state marketplace under the ACA for coverage year 2016. I’d 

note that these results are not definitive regarding the entire application population. Our work focused on identifying indicators of potential enrollment fraud, vulnerability and risk for further review 

as I’ll highlight shortly. We discussed our results with CMS and 

the California exchange and their responses are included in our 

final report. 

In terms of what’s at risk, ACA coverage is a substantial financial commitment for the federal government. About 11 million enrollees have coverage of which up to 85 percent receive subsidies. 

CFBO estimates subsidy costs for fiscal year 2017 at about 56 billion and totaling 866 billion for the next 10 years. In this regard 

I would note that while subsidies are paid directly to insurers, they 

nevertheless represent a financial benefit to enrollees in the form 

of reduced overall costs. That is, premiums and deductibles. 

Turning to our coverage year 2016 results, we initially obtained 

subsidized qualified health plan or Medicaid coverage for all 15 fictitious applicants. In doing so we successfully worked around all 

primary enrollment process checks, namely identify proofing, submitting documents to clear inconsistencies, and filing tax returns 

to reconcile subsidies. 

We subsequently maintained coverage for 11 applicants to the 

present that is well into the coverage year, even though some had 

not filed tax returns or submitted documentation to clear information inconsistencies as required. Our subsidies totaled about 

$60,000 on an annualized basis. We failed to maintain coverage for 

three applicants because of payment issues, and for one applicant 

whose coverage was eventually terminated because of intentional 

failure to submit requested documentation. 

These results, combined with those from our earlier work involving coverage years 2014 and 2015, form a consistent pattern of 

three principal interrelated fraud risk indicators which we’re pursuing further during our ongoing ACA related work. First, no yearon-year changes in the enrollment processes and controls are readily apparent, suggesting that these remain fundamentally vulnerable to fraud at multiple points along their entire spectrum—front, 

middle, and end—raising the overall program integrity risk for 

ACA. 

Second, applicants intending to act fraudulently to obtain coverage in which they’re not otherwise entitled, such as our fictitious 

applicants, could exploit the enrollment process and its various accommodations such as self-attestation, deadline extensions, and reVerDate Nov 24 2008 15:23 May 10, 2017 Jkt 037690 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-168 CHRIS
39 

laxed standards for resolving inconsistencies to their advantage 

and maintain policies virtually through the entire coverage year. 

Third, even if such applicants subsequently are flagged and lose 

their coverage for administrative compliance issues they’re able to 

apply for new coverage the following open season as allowed by 

program rules, thus engaging essentially in a form of health coverage arbitrage. 

In closing, I’d underscore that a program of this scope and scale 

is inherently at risk for fraudulent activity and accordingly it is essential that a high priority is placed on implementing effective preventive enrollment processes and controls up front and help narrow 

the window of opportunity for such risk and safeguard the government’s substantial investment. In this regard CMS told us that it’s 

responding to eight recommendations we made in our February 

2016 report and if executed well and then sustained this represents 

a major opportunity to address the vulnerabilities we identified to 

reduce risk and enhance program integrity. 

Chairman Pitts and Murphy, this concludes my remarks. I look 

forward to the subcommittee’s questions. Thank you. 

[The prepared statement of Seto Bagdoyan follows:] 

40 


22696.021

GAO 

For Release on Delivery 

Expected at 10:00 a.m. ET 

Wednesday, September 14, 2016 

GA0·16·882T 

United States Government Accountability Office 

Testimony 

Before the Subcommittees on Health 

and Oversight and Investigations, 

Committee on Energy and Commerce, 

House of Representatives 

HEALTH CARE 

Results of Recent 

Undercover Testing for 

Patient Protection and 

Affordable Care Act 

Coverage, and Review of 

Market Concentration in 

the Private Insurance 

Markets 

Statement of Seto J. Bagdoyan, Director, 

Forensic Audits and Investigative Service 
41 


22696.022

Chairmen Pitts and Murphy, Ranking Members Green and DeGette, and 

Members of the Subcommittees: 

I am pleased to be here today to discuss enrollment for health-care 

coverage obtained through the health-insurance marketplaces, or 

exchanges, established under the Patient Protection and Affordable Care 

Act (PPACA). 1 PPACA subsidies are available to those eligible to 

purchase private health-insurance plans from a marketplace who meet 

certain income and other requirements. With those subsidies and other 

costs, the act represents a significant, long-term fiscal commitment for the 

federal government. According to the Congressional Budget Office, the 

estimated cost of subsidies and related spending under the act is $56 

billion for fiscal year 2017, rising to $106 billion for fiscal year 2026, and 

totaling $866 billion for fiscal years 2017-20262 

While subsidies under PPACA are generally not paid directly to enrollees, 

participants nevertheless benefit financially through reduced monthly 

premiums or lower costs due at time of service, such as copayments. 3 

Because subsidy costs are contingent on who obtains coverage, 

enrollment controls that help ensure only qualified applicants are 

approved for subsidized coverage are a key factor in determining federal 

expenditures under the act. In addition, PPACA provided for the 

expansion of the Medicaid program• Under the expansion, states may 

choose to provide Medicaid coverage to nonelderly adults who meet 

income limits and other criteria. The federal government is to fully 

reimburse states through calendar year 2016 for the Medicaid 

expenditures of "newly eligible" individuals who gained Medicaid eligibility 

L No. 111-148. 124 Stat. 119 (Mar. 23, 2010). as amended by the Health Care and 

Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (Mar. 30, 2010) 

("HCERA"). In thls testimony, references to PPACA include any amendments made by HCERA. 

2Re!ated spending includes marketplace grants to states and other items. 

3Enrollees can pay lower monthly premiums by virtue of a tax credit the act provides. They 

may elect to receive the tax credit in advance, to lower premium cost, or to receive it at 

time of income-tax filing, which reduces tax liability. 

4

PPACA provides states with additional federal funding to expand their Medicaid 

programs to cover adults under 65 with income up to 133 percent of the federal poverty 

!eve!. Because of the way the limit is calculated, using what is known as an "income 

disregard," the level is effectively 138 percent of the federal poverty level. In this 

testimony, the term ''state" includes the District of Columbia. 

Page 1 GA0-16-882T 
42 


22696.023

through the expansions According to the Office of the Actuary of the 

Centers for Medicare & Medicaid Services (CMS), federal expenditures 

for the Medicaid expansion are estimated at $430 billion from 2014 

through 2023. 

The private health-insurance market has historically been highly 

concentrated-that is, a small number of issuers in a market enrolled a 

significant portion of the people in that market. 6 A highly concentrated 

market may indicate a less competitive market and could affect 

consumers' choice of health-plans and their premiums. PPACA contained 

a number of provisions that took effect in 2014 and could affect market 

concentration among health issuers. 

My statement will summarize the findings of three recently issued reports' 

and will (1) describe the results of our undercover testing of eligibility and 

enrollment controls for the federal Health Insurance Marketplace 

(Marketplace) and selected state-based marketplaces for the 2015 and 

2016 coverage years, and (2) discuss findings from our review of private 

health-insurance market concentration in three markets: individual, smallgroup, and large-group• 

For our report in which we conducted undercover testing for the 2015 

coverage year, we submitted, or attempted to submit, 18 fictitious 

applications by telephone and online. Ten of these applications tested 

"newly eliglbleH reimbursement rate drops to 95 percent in calendar year 2017, 94 

percent in calendar year 2018, 93 percent in calendar year 2019, and 90 percent 

afte!Ward. 

6We use the tenn "issuer" when referring to the insurance entities that are licensed by a 

state to engage in the business of insurance in that specific state. 

7

GAO, Patient Protection and Affordable Care Act: Finaf Results of Undercover Testing of 

the Federal Marketplace and Selected State Marketplaces for Coverage Year 2015, 

GA0-16-792 (Washington, D.C.: Sept 9, 2016); Patient Protection and Affordable Care 

Act: Results of Undercover Enrollment Testing for the Federal Marketplace and a Selected 

State Marketplace for the 2016 Coverage Year, GA0-16-784 (Washington, D.C.: Sept. 12, 

2016); and Private Health Insurance: In Most States and New Exchanges, Enrollees 

Continued to be Concentrated among Few Issuers in 2014, GA0-16-724 (Washington, 

D.C .. Sept. 6, 2016). 

8

The individual market offers health insurance coverage directly to individual consumers 

other than in connection with a group health plan, while under the small-group market and 

the large-group market individuals obtain coverage through a group plan typically 

maintained by smaU employers and large employers, respectively. 

Page 2 GA0-16-882T 
43 


22696.024

Background 

controls related to obtaining subsidized coverage available through the 

federal Marketplace in New Jersey and North Dakota, and through statebased marketplaces in California and Kentucky. We chose these states 

based partly on range of population and whether the state had expanded 

Medicaid eligibility under PPACA The other 8 applications tested controls 

for determining Medicaid eligibility. 9 

For our report in which we conducted undercover testing for the 2016 

coverage year, we submitted 15 fictitious applications for subsidized 

coverage through the federal Marketplace in Virginia and West Virginia 

and through the state-based marketplace in California. Our applications 

tested verifications related to (1) applicants making required income-tax 

filings, and (2) applicants' identity or citizenship/immigration status. 1

° For 

both coverage years, the results of our undercover testing, while 

illustrative, cannot be generalized to the overall population of applicants 

or enrollees. 

For our report on private-health insurance market concentration and 

changes in issuer participation, we determined market share using 

enrollment data from the 2011 through 2014 Medical Loss Ratio datasets 

that issuers are required to report annually to CMS. To obtain 2014 

enrollment data for the issuers in the exchanges, we analyzed Unified 

Rate Review data that certain issuers are required to report to CMS. For 

both datasets, enrollment for each issuer is available only at the state 

level, and 2014 data are the most recent available.'' 

We conducted the work upon which this statement is based in 

accordance with generally accepted government auditing standards. We 

conducted our related investigative work in accordance with investigative 

standards prescribed by the Council of the Inspectors General on Integrity 

and Efficiency. 

PPACA provides for the establishment of health-insurance marketplaces 

to assist consumers in comparing and selecting among insurance plans 

GA0-16-792 for additional details on our objectives, scope, and methodology 

10See GA0-16-784 for additional details on our objectives, scope, and methodology. 

11See GA0-16~724 for addition a! details on our objectives, scope, and methodology. 

Page 3 GA0-16-882T 
44 


22696.025

offered by participating private issuers of health-insurance coverage." 

Under PPACA, states may elect to operate their own health-insurance 

marketplaces, known as state-based marketplaces, or they may rely on 

the federal Marketplace, known to the public as HealthCare.gov. 13 These 

marketplaces were intended to provide a single point of access for 

individuals to enroll in private health-plans, apply for income-based 

subsidies to offset the cost of these plans-which, as noted, are paid 

directly to health-insurance issuers-and, as applicable, obtain an 

eligibility determination or assessment of eligibility for other healthcoverage programs, such as Medicaid or the Children's Health Insurance 

Program. 14 CMS, a unit of the Department of Health and Human Services 

(HHS), is responsible for overseeing the establishment of these online 

marketplaces, and the agency maintains the federal Marketplace. 

To be eligible to enroll in a "qualified health plan" offered through a 

marketplace-that is, one providing essential health benefits and meeting 

other requirements under PPACA-an individual must be a U.S. citizen or 

national, or otherwise lawfully present in the United States; reside in the 

marketplace service area; and not be incarcerated (unless incarcerated 

while awaiting disposition of charges)." To be eligible for Medicaid, 

individuals must meet federal requirements regarding residency, U.S. 

citizenship or immigration status, and income limits, as well as any 

additional state-specific criteria that may apply. 

Marketplaces are required by PPACA to verify application information to 

determine eligibility for enrollment and, if applicable, determine eligibility 

the act required, by January 1, 2014, the establishment of health-insurance 

marketota.ces all states. In states not electing to operate their own marketplaces, the 

government was required to operate a marketplace. 

13SpecificaHy, according to the Department of Health and Human Services (HHS}, for the 

2016 coverage year, there were 38 states using the HealthCare.gov system. Among all 

consumer health plan selections, about 76 percent (8.4 million) were in states using the 

HealthCare.gov system. 

141ndividuals may also continue to apply for Medicaid coverage or the Children's Health 

Insurance Program through direct application to their respective state agencies. According 

to CMS officials, eligibility requirements are generally the same for both programs. In this 

statement, our testing was only for Medicaid eligibility. 

15!n this statement, we use "qualified health plan" to refer to coverage obtained from 

private insurers, as distinguished from enrollment in a public health program such as 

Medicaid. 

Page4 GA0-16.S82T 
45 


22696.026

for the income-based subsidies or Medicaid. These verification steps 

include validating an applicant's Social Security number, if one is 

provided; 16 verifying citizenship, status as a U.S. national, or lawful 

presence by comparison with Social Security Administration or 

Department of Homeland Security records; and verifying household 

income with tax-return data from the Internal Revenue Service (IRS), as 

well as data on Social Security benefits from the Social Security 

Administration. 17 

Under PPACA's eligibility verification process, "inconsistencies" are 

generated when individual applicant information does not match federal 

data sources-either because information an applicant provided does not 

match information contained in data sources that a marketplace uses for 

eligibility verification at the time of application, or because such 

information is not available. If there is an application inconsistency, the 

marketplace is to determine eligibility using the applicant's attestations 

and ensure that subsidies are provided on behalf of the applicant, if 

qualified to receive them, while the inconsistency is being resolved. Under 

the marketplace process, applicants may be asked to provide additional 

information or documentation for the marketplaces to review to resolve 

the inconsistencies. 

In addition to the two related reports discussed in this statement, we have 

issued a body of work in which we examined enrollment and verification 

controls of the federal and state marketplaces. For example, in February 

2016, we issued a report addressing CMS enrollment controls and the 

agency's management of enrollment fraud risk. That report included eight 

recommendations to CMS to strengthen its oversight of the federal 

16A marketplace must require an applicant who has a Social Security number to provide 

the number. 42 U.S.C. § 18081(b)(2) and 45 C.F.R. § 155.310(a)(3)(i). However, having a 

Social Security number is not a condition of eligibility. 

17For further background, see Department of Health and Human Services, Office of 

Inspector General, Not All of the Federally Facilitated Marketplace's fntemal Controls 

Were Effective in Ensuring That Individuals Were Properly Determined Eligible for 

Qualified Health Plans and Insurance Affordabflity Programs, A-09-14-01 011 

(Washington, D.C.: Aug. 6, 2015); GAO, Patient Protection and Affordable Care Act: IRS Needs to Strengthen Oversight ofT ax Provisions for Individuals, GA0-15-540 

(Washington, D.C.: July 29, 2015); and GAO, Healthcare.gov: CMS Has Taken Steps to 

Address Problems, but Needs to Further Implement Systems Development Best 

Practices, GA0-15-238 (Washington, D.C.: Mar. 4, 2015). 

Page 5 GA0-16-882T 
46 


22696.027

Marketplace. 18 CMS concurred with our recommendations, and 

implementation is pending. 

In terms of concentration in the private health-insurance market, in 

December 2014 we reported that, from 2010 through 2013, enrollment in 

most states was concentrated among the largest issuers in each of the 

three types of health-insurance markets: the large-group market (under 

which individuals obtain coverage through a group plan maintained by 

large employers), the small-group market (under which individuals obtain 

coverage through a group plan maintained by small employers), and the 

individual market (coverage sold directly to individual consumers other 

than in connection with a group health-plan)." 

As mentioned above, PPACA contained provisions that could affect 

market concentration among health issuers. For example, the law 

required the establishment of individual health-insurance exchanges, as 

well as Small Business Health Options Programs ("SHOPs"), within each 

state by 201420 These exchanges are a new type of market where 

eligible individuals and small employers, respectively, can compare and 

select among qualified insurance plans offered by participating issuers. 

PPACA does not require issuers to offer plans through these exchanges 

but instead generally relies on market incentives to encourage their 

18GAO, Patient Protection and Affordable Care Act CMS Should Act to Strengthen 

Enrollment Controls and Manage Fraud Risk, GA0-16-29 (Washington, D.C.: Feb. 23, 

2016). We also testified on preliminary results of our undercover testing in July 2014 and 

October 2015. See GAO, Patient Protection and Affordable Care Act: Preliminary Results 

of Undercover Testing of Enrollment Controls for Health Care Coverage and Consumer 

Subsidies Provided Under the Act, GA0-14-705T (Washington, D.C.: July 23, 2014); and 

Patient Protection and Affordable Care Act: Preliminary Results of Undercover Testing of 

the Federal Marketplace and Selected State Marketplaces for Coverage Year 2015, 

GA0-16-159T (Washington, D.C.: Oct. 23, 2015). 

19GAO, Private Health Insurance: Concentration of Enrolfees among Individual, Small 

Group, and Large Group Insurers from 2010 through 2013, GA0-15-101R (Washington, 

D.C .. Dec. 1, 2014). For group health plan purposes, federal law defines a small employer 

as having an average of 1 to 50 employees on business days during the preceding 

calendar year and employing at least 1 employee on the first day of the plan year; 

however, states may instead elect to define the term as an employer having an average of 

1 to 100 employees on business days during the preceding calendar year. See 42 U.S.C. 

§§ 300gg-91(e), 18024(b). 

20States may establish separate individual and SHOP exchanges or a single exchange to 

serve both lndfVIduals and small employers. 

Page6 GA0-16-BB2T 
47 


22696.028

The Marketplaces 

Approved Subsidized 

Coverage for the 

2015 Coverage Year 

for 17 of 18 of our 

Fictitious Applicants 

participation. Issuers seeking to offer a health plan in an individual 

exchange or SHOP must first have that plan approved by the exchange in 

the state. About a third of the states chose to operate their exchanges in 

2014 and approved issuers for participation. In the remaining states 

electing not to establish and operate their own exchange, PPACA 

required HHS to carry out these responsibilities. As reported in August 

2014, most of the largest issuers holding the majority of the market in the 

2012 individual and small-group markets participated in the 2014 

exchanges, although most of the numerous smaller issuers in those 

markets did not. 21 

Our undercover testing for the 2015 coverage year found that the healthcare marketplace eligibility determination and enrollment process for 

qualified health-plans-that is, coverage obtained from private insurerswas vulnerable to fraud. The federal Marketplace or selected state-based 

marketplaces approved each of 10 fictitious applications we made for 

subsidized health-plans. Although 8 of these 10 fictitious applications 

failed the initial online identity-checking process, all10 were subsequently 

approved. Four applications used Social Security numbers that, according 

to the Social Security Administration, have never been issued, such as 

numbers starting with "000." Other applicants obtained duplicate 

enrollment or obtained coverage by claiming that their employer did not 

provide insurance that met minimum essential coverage. 

For eight additional fictitious applications, initially made for Medicaid 

coverage, we were approved for subsidized health-care coverage in 

seven of the eight cases, through the federal Marketplace and the two 

selected state-based marketplaces. 

Three of our applications were approved for Medicaid, which was the 

health-care program for which we originally sought approval. In each 

case, we provided identity information that would not have matched 

Social Security Administration records. For two applications, the 

marketplace or state Medicaid agency directed the fictitious applicants 

to submit supporting documents, which we did (such as a fake 

immigration card), and the applications were approved. For the third, 

21GAO, Patient Protection and Affordable Care Act' Largest Issuers of Health Coverage 

Participated in Most Exchanges, and Number of Plans Available Varied, GA0·14-657 

(Washington, D.C: Aug. 29, 2014). 

Page7 
48 


22696.029

The Marketplaces 

Approved Subsidized 

Coverage for the 

2016 Coverage Year 

for all 15 of Our 

Fictitious Applicants, 

Even Those Who Had 

Not Filed Required 

Tax Returns 

the marketplace did not seek supporting documentation, and the 

application was approved by phone. 

For four applications, we were unable to obtain approval for Medicaid 

but were subsequently able to gain approval of subsidized health-plan 

coverage. In one case, we falsely claimed that we were denied 

Medicaid and were able to obtain the subsidized health-plan when in 

fact no Medicaid determination had been made at that time. 

For one application, we were unable to enroll into Medicaid, in 

California, because we declined to provide a Social Security number. 

According to California officials, the state marketplace requires a 

Social Security number or taxpayer-identification number to process 

applications. 

We submitted fictitious documentation as part of the application and 

enrollment process. According to officials from CMS, California, Kentucky, 

and North Dakota, the marketplaces or Medicaid office only inspect 

supporting documentation that has obviously been altered. Thus, if the 

documentation submitted did not show signs of alteration, it would not be 

questioned for authenticity. 

Our undercover testing for the 2016 coverage year found that the healthcare marketplaces' eligibility determination and enrollment processes 

continued to be vulnerable to fraud. The marketplaces initially approved 

coverage and subsidies for our 15 fictitious applications, including 1 

application for Medicaid, made through the federal Marketplace in Virginia 

and West Virginia and through the state marketplace in California. 

However, three applicants were unable to put their policies in force 

because their initial payments were not successfully processed. 

Therefore, we focused our testing on the remaining 12 applications -11 

applications for qualified health-plans, and 1 for Medicaid. 

For four applications, to obtain 2016 subsidized coverage, we used 

identities from our 2014 testing that had previously obtained 

subsidized coverage. The 2016 coverage year was the first year in 

which verification was required to ensure that applicants who 

previously received a specific type of federal subsidy under the act 

had filed a federal tax return. This was a condition for these applicants 

to retain this benefit in 2016. None of the four fictitious applicants had 

filed a 2014 tax return but all were approved for the 2016 subsidies. 

Marketplace officials told us that they allowed applicants to attest to 

PageS GA0·16-882T 
49 


22696.030

filing taxes if information from the IRS indicated that the applicant did 

not file tax returns. Marketplace officials said one reason they allow 

attestations is the time lag between when tax returns are filed and 

when they are reflected in IRS's systems.22 CMS officials said they 

are rechecking the 2014 tax-filing status and will remove subsidies for 

applicants that have not filed a 2014 tax return. 

For eight applications, we used new fictitious identities to test 

verifications related to identity or citizenship/immigration status and, in 

each case, successfully obtained subsidized coverage. 

When the marketplaces directed 11 of the 12 applicants to provide 

supporting documents, we submitted fictitious documents as follows: 

For five applications, we provided all documentation requested, and 

the applicants were able to retain coverage. 

For three applications, we provided only partial documentation, and 

the applicants were able to retain coverage. Two of these applicants 

were able to clear inconsistencies through conversations with 

marketplace phone representatives even though the information 

provided over the phone did not match the fictitious documentation 

that we previously provided. 

For three applications, we did not provide any of the requested 

documents, and the marketplaces terminated coverage for one 

applicant but did not terminate coverage for the other two applicants. 

Marketplace officials told us that without specific identities of our fictitious 

applicants-which we declined to provide, to protect the identities-they 

could not comment on individual outcomes. In general, however, they told 

us our results indicate their marketplace processes worked as designed. 

For example, according to officials from CMS, some of our application 

outcomes could be explained by decisions to extend document filing 

deadlines. CMS regulations authorize the Marketplace to extend the 

standard 90-day inconsistency resolution period if the applicant 

22 1ndividua! income tax returns are ordinarily due by April 15, but taxpayers can request a 

taxwfl!ing deadline extension to October 15. IRS officials told us that assuming a return is 

complete, normal processing time is typically 3 to 12 weeks. Also, IRS updates in taxreturn-filing-status information provided to marketplaces, which occur monthly, can add 

additional time. 

Pag0 9 GA0~1$-882T 
50 


22696.031

demonstrates a good-faith effort to obtain the required documentation 

during the period." Under good-faith-effort extensions for 2016, 

documentation requirements are not waived, but applicants were 

provided additional time to submH documents. 

For Covered California applications, when our applicants could not clear 

online identity proofing and contacted representatives by phone, the 

representatives were correct in first seeking to direct the applicants to visit 

enrollment counselors, so they could verify identities in person. While inperson presentation of identity documentation is never required, the 

officials said, an in-person visit provides an opportunity to examine 

identity documents. 

In discussing these outcomes for our fictitious applicants, federal and 

state marketplace officials reaffirmed, as we have reported previously, 

that the marketplaces do not seek to identify fraudulent document 

submissions. Federal Marketplace officials said document-review 

standards-in which CMS's documents-processing contractor is not 

required to examine documents for fraud-remain unchanged. Unless 

documents show signs of being visibly altered, they are accepted as 

authentic24 In response to our findings, the Department of Health and 

Human Services stated that it continues to strengthen marketplace 

controls. 

23For most types of inconsistencies, the standard resolution period is 90 days from the 

date a notice is sent to the applicant However, for inconsistencies related to citizenship, 

status as a U.S. national, or lawful presence, the inconsistency period is 90 days from the 

date the notice is received by the applicant. To accommodate mail delivery time, for these 

inconsistencies CMS generally applies a standard resolution period of 95 days from the 

date the notice is sent to the applicant 

24CMS officials told us that although contractor staff are not trained in fraud detection, 

there is an escalation process if staff believe there is a discrepancy between a document 

filed and examples provided in CMS guidance. 

Page 10 GA0-16·882T 
51 


22696.032

Health-Insurance 

Markets Remained 

Concentrated in Most 

States in 2014, While 

Issuer Participation 

Generally Decreased 

We found that enrollment in private health-insurance plans remained 

concentrated among a small number of issuers in most states in 2014, 

including in the newly established exchanges. On average, in each state, 

11 or more issuers participated in each of three types of marketsindividual, small-group, and large-group-from 2011 through 2014. 

However, in most states, the 3 largest issuers in each market had at least 

an 80 percent share of the market during the period. Beginning in 2014, 

issuers in the individual and small-group markets could sell coverage 

through the individual and SHOP exchanges established by PPACA. Not 

all issuers in these overall markets participated in the exchanges, and 

several exchanges had fewer than 3 issuers participating. Enrollment 

through these exchanges was generally more concentrated among a few 

issuers than was true for the overall markets. We did not assess the 

effect of the law on concentration and participation as 2014 was the first 

year of implementation for certain PPACA insurance reforms. 

In nearly all states, we found that the number of issuers participating in 

individual markets decreased from 2013 to 2014, while fewer states' 

small-group and large-group markets had decreased participation. 

However, across the three types of markets, those issuers exiting each 

state market before 2014 generally had less than 1 percent of the market 

in the prior year. There were also issuers that newly entered state 

markets in 2014. Their market shares in 2014 varied across the three 

types of markets, with some entering issuers in the individual market 

capturing a market share of over 10 percent. Newly entering issuers 

generally captured a larger share of the enrollment sold through the 

exchanges than through the overall markets, and some captured a 

majority of their exchange market. 

Chairmen Murphy and Pitts, Ranking Members DeGette and Green, and 

Members of the Subcommittees, this concludes my statement. I would be 

happy to respond to any questions that you might have. 

Page 11 GA0-16·882T 
52 


22696.033

GAO Contact and 

Staff 

Acknowledgments 

(101117) 

For questions about this statement, please contact Seto Bagdoyan at 

(202) 512-6722 or bagdoyans@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this statement. 

Individuals making key contributions to this statement include John 

Dicken, Director; Philip Reiff and William Hadley, Assistant Directors; 

Ariel Vega, Christopher H. Schmitt, Ranya Elias, Colin Fallon, James 

Murphy, Olivia Lopez, Madeline Messick, and Dee Abasute. 

Page 12 GA0·16·882T 
53 


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55 

Mr. PITTS. The chair thanks the gentleman. I will begin the 

questioning and recognize myself 5 minutes for that purpose. Let 

me just say in the beginning, GAO has been a great government 

watchdog for taxpayers, and while the undercover enrollment testing for the exchanges is thorough and helpful, troubling to learn 

just how bad the vulnerabilities of the ACA exchanges remain. 

Mr. Bagdoyan, your testimony offered a preview of your agency’s 

findings in this space. Let’s examine a few of the numbers; talk 

about the fictitious scenarios. As I understand it, this is the first 

year that coverage eligibility must be verified to determine whether 

an applicant who previously received an exchange plan filed federal 

tax returns; is that correct? 

Mr. BAGDOYAN. Yes, Mr. Chairman. That’s correct. 

Mr. PITTS. The GAO tested fictitious applicants that you previously used for plan year 2014. Now of the 15 applicants that you 

attempted to gain coverage for, all 15 were initially enrolled in 

plans. It is my understanding that still today, ten of these fictitious 

applicants are receiving monthly advanced premium tax credits, 

about $1,100 a month, and all ten qualify for cost sharing reduction 

or CSR payments. Are any of these ten fictitious enrollees false applicants you used in 2014 who never paid federal taxes? 

Mr. BAGDOYAN. Four of those, Mr. Chairman, are essentially revived identities from our 2014 work. 

Mr. PITTS. Administrator Slavitt, CMS announced that APTC 

and CSR subsidies would be ended for 2016 enrollees who received 

APTCs in 2014 but did not reconcile these payments on their federal taxes. In one of these fictitious cases, a federal marketplace 

representative initially told the enrollee they were not approved for 

subsidies. 

But after the fictitious enrollee verbally attested that they had 

filed a return, the representative approved the subsidized coverage 

even though it was a false attestation. Why does CMS allow applicants to self-attest to this safeguard designed to protect taxpayer 

funded premium credit? 

Put your mike on. 

Mr. SLAVITT. Yes, thank you, Chairman Pitts. And thank you to 

Mr. Bagdoyan for the work that you all have done. 

I think with respect to the people who have, we call them people 

who have failed to reconcile who have received an advanced premium tax credit but haven’t yet filed, many of those in our work 

with the IRS turn out to be people who are filing taxes for the first 

time. And so what happened is that when they came back to get 

coverage in 2015, if the IRS didn’t have a file for them that they 

filed, they were not able to get coverage. 

We did allow people to attest if they had an extension or if they 

had filed taxes and they claimed that the IRS hadn’t received them 

yet, but that’s not where we stop. And I think to the heart of your 

question, we had 19,000 people who so attested and many of them 

have since demonstrated that they have paid their taxes. And then 

as of this month, those that have not yet demonstrated that those 

people will be terminated from advanced pay on a tax credit. 

Mr. PITTS. So how many individuals have had their coverage 

ended due to violating this safeguard? 

56 

Mr. SLAVITT. As of this month it will be several thousand. I don’t 

have the exact figure here with me. 

Mr. PITTS. OK. According to GAO, the IRS expressed concern to 

your agency about this attestation approach, and I also point out 

that a February 2016 report from GAO recommended that CMS 

conduct a risk assessment of potential exchange fraud. Has CMS 

conducted a risk assessment of the application eligibility and enrollment process? 

Mr. SLAVITT. I’m not entirely sure what you’re referring to. I do 

know that the GAO gave us a recommendation earlier to create a 

risk assessment framework through which we assess all of the potential risks to the exchanges, and we have indeed implemented 

that and it’s actually been extremely helpful to us. 

Mr. PITTS. And can you provide the committee with a copy of 

that report? 

Mr. SLAVITT. The report from the GAO? 

Mr. PITTS. Yes, the recommendations. 

Mr. SLAVITT. The recommendations, sure. We’ll get that. 

Mr. PITTS. All right. We now have 3 years of undercover testing. 

The results have not improved, and I know I speak for taxpayers 

across Pennsylvania and our country when I say this is frustrating 

and alarming. I will yield the balance of my time to Cathy McMorris Rodgers for her comments. 

Mrs. MCMORRIS RODGERS. In my home in Eastern Washington— 

oh, thanks—our state insurance commissioner recently approved 

premium increases for 2017. On average they are increasing by 

over 13 percent. Rate increases like these are being seen across the 

country and they are far from affordable. In my state they go from 

4.6 percent to 22.75. 

I want to take the moment here just to thank my colleagues for 

their efforts to come up with common sense solutions to ensure 

Americans will have access to high quality and the lowest cost possible, and we must respect the sacred relationship between the patient and the doctor. Thank you very much. 

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

the ranking member of the Health Subcommittee, Mr. Green, 5 

minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman, and thank our witnesses 

for being here today and the work you do. Let me talk a little bit 

about Texas’ experience. Under the Affordable Care Act millions of 

Americans are able to access their vital care resources in our communities. In my state Texas we realized the following benefits. 

During the last enrollment period over 1.3 million individuals selected a marketplace plan. Forty eight percent of those individuals 

were new consumers. Unfortunately, 1.2 million individuals who 

would otherwise be covered remain uninsured because Texas refused to expand the Medicaid. As I said earlier, 50,000 of that 1.2 

million are my constituents. 

As of 2015, the ACA provided community health centers grantees 

in Texas with over 470 million in funding to offer a broad array 

of primary care, extended hours of operation and hire more providers and develop clinical spaces. Medicare beneficiaries in Texas 

have saved more than $971 million on prescription drugs because 

57 

of the Affordable Care Act and the closing of the donut hole that 

was created in 2003 with Medicare Part D. 

And I am proud of the progress that we have in our country 

made with the ACA and I couldn’t be more pleased with these results, but Congress could make it better by stopping the dozens of 

repeal efforts and help provide more health care for our constituents. Regardless of whether you supported the ACA 6 years ago or 

when it passed into law, it is hard to deny that there is historic 

success. 

Before the Affordable Care Act was passed the insurance system 

was broken. Premiums were increasing rapidly. For example, in 

2009–2010, according to Kaiser Family Foundation survey, the average increase in individual market premiums for individuals who 

were covered more than 1 year was 15 percent. Under the pre-ACA 

system there were no protections for consumers, and insurance 

companies could drop them within any time. 

Administrator Slavitt, before the ACA was passed could an individual with preexisting condition be charged more for insurance 

than his or her healthy peers? 

Mr. SLAVITT. Yes. In most places in the country, yes, that’s correct. 

Mr. GREEN. Before the ACA was passed could insurers protect 

their bottom lines by avoiding the sickest and costliest patients in 

the individual market? 

Mr. SLAVITT. Yes, in almost every state in the country. 

Mr. GREEN. Before the ACA was passed was there any mechanism for the federal government to review health insurance rates 

to ensure that the rates were reasonable; did consumers have any 

recourse if their premiums went up 20, 30 or 40 percent? 

Mr. SLAVITT. No, not in most places, sir. 

Mr. GREEN. Was there any out-of-pocket maximum or did consumers have to shoulder potentially tens or hundreds of millions, 

hundreds of thousands of dollars due to medical emergencies? 

Mr. SLAVITT. There was not. 

Mr. GREEN. Let me give you an example in my last time. When 

I was in business we had a printing company. We had 13 employees and one of my jobs as the manager of it was to negotiate for 

insurance rates. Small business, 13 employees; we could never get 

one of the top companies to give us bids. But we did select coverage 

because we also had a union contract for our line folks so we had 

to match what the union plan would have done, so we negotiated 

it and we would sign a 3-year contract and with renewal opening 

of the premiums every year. 

Well, in my experience in that every year of that 3-year contract, 

they would come in and offer us, say, well, we need 20 or 25 percent more. We would negotiate it down. It ended up I almost had 

to negotiate every year with a new company. 

But my experience was with 13 employees one of our carriers 

who had our insurance said, well, we need to raise your premiums 

substantially because one of your employees actually had a double 

mastectomy. And he said, what we would suggest, if you keep your 

group at 12 people and buy a separate plan for that 13th employee. 

And I said, well, I appreciate that option, but that particular lady 

is the owner’s wife, and I will be glad to share you are willing to 

58 

put them out on an individual market. And believe me, our negotiations got much better. 

That doesn’t need to happen today because of the Affordable 

Care Act. And that is why it is successful, and it could be more successful if this Congress would do like we have done every other 

piece of legislation that has ever been passed. Something gets 

passed, you wait a few years and see what the problems are and 

you go back in and fix it. But we haven’t had that opportunity 

since we have tried to repeal it over the last 6 years probably 60- 

something times. 

But if you are looking for perfection in any piece of legislation 

you don’t come to Congress. We compromise, we work to get things 

passed, so whatever we pass needs to be looked at by new congresses or next congresses to make sure we can fix it, but the Affordable Care Act has not been subjected to that because of the repeal. I would love to see a plan that would actually help expand 

coverage more than we have done. 

Thank you, Mr. Chairman, and I yield back my time. 

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

the chair of the O&I Subcommittee, Dr. Murphy, 5 minutes for 

questions. 

Mr. MURPHY. Thank you, Mr. Chairman. 

Mr. Slavitt, first I want to ask, you had mentioned in your testimony that premiums have gone down in actuality or they have 

gone, they are less than what CBO estimated? 

Mr. SLAVITT. I think what I said is after the second, after 2016, 

so current premiums are between 12 and 20 percent lower than 

ingoing estimates. And I can get you the cite for that. 

Mr. MURPHY. Than estimates, they are lower than estimates? 

Mr. SLAVITT. They’re lower than they were estimated to be at 

this time. And I can get you the cite for that. 

Mr. MURPHY. Well, I just want to deal with reality not estimates, 

because the CBO is not held in high esteem in terms of always 

being accurate. 

Mr. SLAVITT. It wasn’t CBO. 

Mr. MURPHY. But estimates, have you shared this information 

with Aetna, United and Humana? Because the fact that they bailed 

out of the market saying this is out of control, maybe you have a 

breakthrough for them that all of these companies haven’t seen. 

It is amazing to me. Health care costs have gone up. I saw one 

Standard & Poor estimate said they have gone up about 69 percent 

in the last few years. Insurance premiums have gone up so there 

is adverse selection. People enroll and then they disenroll when 

they are well; co-pays and deductibles are still high. 

So I hope you can show us the source of this. I don’t want estimates. I want hard core data with regard to are premiums going 

up or not. All the data we see is they are going up. In the Pittsburgh market they are going up. In other communities they are 

going up. CO–OPs are failing because they can’t handle the finances. 

So unless something is heavily subsidized or old or a problematic 

health program, the costs are going up and that is why people 

aren’t signing up. So it is not a matter of—I just want accurate 

data so we can deal with this, so please get us that. 

59 

Let me ask another question. The committee staff report that we 

released yesterday examines how CMS awarded federal tax dollars 

to state-based exchanges. The ACA states that state-based exchanges were supposed to be self-sustaining by January 1, 2015, 

but CMS gave them extensions so that state-based exchanges could 

continue to use federal money. 

So Mr. Slavitt, your staff tells me that currently as of September 

2016, every state-based exchange is still using federal money; is 

that correct? 

Mr. SLAVITT. Yes. So to clarify, no new money has been certainly 

granted after that initial start-up date. 

Mr. MURPHY. They are still using federal money? 

Mr. SLAVITT. There are states that have no-cost extensions which 

essentially allow them to continue to complete the start-up activity 

that they began—— 

Mr. MURPHY. They are still using federal money. And again I say 

when you talk about premiums being down, the fact that they are 

subsidized is phony, is absolutely phony. How can you have a premium going down if you are still subsidizing it, if we are still bailing out insurance companies? Premiums aren’t going down, it is 

being subsidized. 

So when does CMS think that the federal money is actually 

going to run out? 2017? 2018? 

Mr. SLAVITT. For state-based marketplaces? 

Mr. MURPHY. Yes. Yes. 

Mr. SLAVITT. I think it’ll differ by state. I think we can get you 

the schedule of that. 

Mr. MURPHY. And that is when we are really going to find out 

what premiums are if we are not bailing them out. When the federal money runs out do you think the state-based exchanges will 

be sustainable? 

Mr. SLAVITT. Well, I think each state has its own calculation. As 

people are probably aware, Kentucky most recently has decided to 

move off of the state-based platform to the federal platform. I 

wouldn’t necessarily say that was for reasons that they weren’t 

sustainable, they just chose that they’d rather be on the federal 

platform than the state-based platform, and I think that happens 

for a variety of reasons. 

Mr. MURPHY. That is obfuscating here, because these are not just 

things as, hey, let’s all get together and let’s just switch to a different platform. It is because they have been financial disasters. 

And let’s go to the CO–OPs. You have got 17 closures, one closed 

just this week. HHS OIG issued an audit just a few months ago 

finding that four of the remaining six CO–OPs fell below CMS riskbased capital requirements. So do you think all the remaining six 

CO–OPs will survive the next few months to enroll individuals for 

the 2017 plan year? 

Mr. SLAVITT. So I think the assessment that the states will make 

and we will make it along with the states is whether or not the 

remaining CO–OPs have sufficient capital to get through 2017. 

Mr. MURPHY. And we have given them $1.8 billion in taxpayer 

loans of the 17 that have failed. So when you say sufficient capital 

we are going to have to give them more sufficient capital to help 

them? 

60 

Mr. SLAVITT. No, there is no additional capital. Congress has in fact rescinded, I think it was $6 billion of capital that was due to 

the CO–OPs and that’s, so part of the capital issues that they have. 

We have given the CO–OPs, in trying to level the playing field, 

more options to raise outside capital, and I think several of them 

may in fact do that. 

Mr. MURPHY. Raise outside capital, so that outside capital being 

what? Premiums aren’t paying for the plans then. They are getting 

other outside sources to help bolster the plans so it is not just 

shouldered by the people paying on premiums; am I correct? 

Mr. SLAVITT. It would be the risk-based capital needed to support 

their ability to write business—— 

Mr. MURPHY. So I go back to my original point. If they have riskbased capital coming in, if they have federal subsidies coming in, 

anything you say about premiums going down, first of all, I doubt 

that is true because we are not hearing that from constituents. But 

the second thing is, if you are subsidizing it any reduction is false. 

I yield back. 

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

the gentlelady from Colorado Ms. DeGette, 5 minutes for questions. 

Ms. DEGETTE. Thank you so much, Mr. Chairman. 

Mr. Bagdoyan, I wanted to clarify about the GAO’s undercover 

study that they did here, a few things. As I understand it from 

your statement, there were 15 attempts in three states to get into 

the system; is that right? It wasn’t actually 15 people, it was 15 

attempts by the GAO fake shoppers to do this; is that right? 

Mr. BAGDOYAN. These are essentially—— 

Ms. DEGETTE. Yes or no will work. 

Mr. BAGDOYAN. No, that’s not true. 

Ms. DEGETTE. Fifteen attempts in three—OK, what was it then? 

Mr. BAGDOYAN. It’s 15 individuals attempting. 

Ms. DEGETTE. Fifteen separate individuals? 

Mr. BAGDOYAN. Yes, ma’am. 

Ms. DEGETTE. I thought there was one individual that tried in 

three states, no? 

Mr. BAGDOYAN. That was to test identity theft and—— 

Ms. DEGETTE. I see, OK. But it was 15 individuals in three 

states then. 

Mr. BAGDOYAN. Correct. 

Ms. DEGETTE. OK. Now these were the fake shoppers, these 

weren’t actual consumers. These were people who were getting in 

to try to see if they could do this, right? 

Mr. BAGDOYAN. Yes, these are fictitious people. 

Ms. DEGETTE. Thank you. Now in these type of schemes that the 

report discusses, these 15 fake shoppers, they pay their premiums 

but then they don’t get any health care benefits; is that right? 

Mr. BAGDOYAN. That’s correct. 

Ms. DEGETTE. And in fact they didn’t try to get any health care 

benefits. They just wanted to see if they could get the premium rebate. 

Mr. BAGDOYAN. That’s correct, yes. 

Ms. DEGETTE. Now, so I guess I am a little unclear about why 

somebody would do this in real life, if they pay the premium and 

then not try to get health care insurance. So I guess I wanted to 

61 

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

docs.house.gov/meetings/IF/IF02/20160914/105306/HHRG-114-IF02-20160914-SD003.pdf. 

ask you, do you know of any actual cases of real people who did 

this? 

Mr. BAGDOYAN. I do not. 

Ms. DEGETTE. So you are not aware of any widespread fraud of 

actual people trying to do this, you just know it could be done theoretically? 

Mr. BAGDOYAN. We know it could be done based on—— 

Ms. DEGETTE. Thank you. 

Mr. BAGDOYAN [continuing]. The vulnerabilities of—— 

Ms. DEGETTE. Now I want to ask you something else because I 

am really supportive of efforts to root out fraud in the system, but 

I don’t really understand how this is a useful exercise in the real 

world to see if someone could pay a premium, get a tax credit, and 

then not try to get insurance. I don’t think that would happen in 

the real world, and so what I am wondering about is why this is 

useful. 

But I want to ask about something else, and that is about this 

GAO report that was released by your agency on Monday. We are 

handing you a copy of that right now. 

Mr. BAGDOYAN. Thank you. 

Ms. DEGETTE. What this report did is it looked at enrollees’ experiences during the first year of the ACA exchanges and it collected 

consumer satisfaction information. It is entitled and I am quoting— 

you can see it. 

Mr. BAGDOYAN. Yes. 

Ms. DEGETTE. Most enrollees reported satisfaction with their 

health plans, although some concerns exist. Do you have that? 

Mr. BAGDOYAN. Yes, I do. 

Ms. DEGETTE. Are you familiar with that report, sir? 

Mr. BAGDOYAN. Yes, I am. 

Ms. DEGETTE. Oh, you are familiar. So then you know that the 

main finding of the report is, ‘‘most qualified health plan enrollees 

who obtain their coverage through the exchanges reported overall 

satisfaction with their plans.’’ Is that correct? 

Mr. BAGDOYAN. That’s correct, yes. 

Ms. DEGETTE. Thanks. 

Mr. Chairman, I would like to enter this report into the record. 

Mr. PITTS. Without objection, so ordered. 1

Ms. DEGETTE. Thank you. Now there is another piece of evidence 

that shows what exactly we are trying to do here. We have one 

GAO report that shows 15 people, fake shoppers in three states 

trying to do something that no real person would do in real life, 

and then we have reports from the same agency on the same day 

about enrollee satisfaction taken from large national surveys. 

But that is not the subject of this hearing today, only the other 

thing that is not likely to happen in real life. And so I just think 

we have to keep the record clear and we also again have to focus 

as we move forward on fixing the ACA. 

I just want to ask you, Administrator Slavitt, a question about 

this new report about the census and the CDC data that both show 

that uninsured rates are at historic lows. The census showed that 

62 

the uninsured rate fell to 9.1 percent in 2015 down from 13.3 percent in 2013; is that correct? 

Mr. SLAVITT. Yes, that’s correct. 

Ms. DEGETTE. Now the CDC data showed a drop in the uninsured rate to 8.6 percent down from 16 percent in 2010; is that correct? 

Mr. SLAVITT. That’s correct. 

Ms. DEGETTE. And so it really shows that there are now 20 million Americans who have health insurance because of the ACA’s 

various coverage provisions; is that accurate? 

Mr. SLAVITT. Yes that is. 

Ms. DEGETTE. Thank you. I yield back. 

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

the gentleman from Illinois, Mr. Shimkus, 5 minutes for questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman. Welcome to our witnesses. And, you know, this is just a contentious issue and facts 

are important and data, and customer satisfaction viewed by our 

constituents is what drives a lot of this. 

Mr. Slavitt, under the Affordable Care Act if you like your health 

care plan will you be able to keep it? Yes or no. 

Mr. SLAVITT. If it continues to be offered, yes. If not, then you’d 

switch to, shop and find a different plan. 

Mr. SHIMKUS. OK, so no, you can’t if the plan that you had prior 

to the Affordable Care Act is no longer available to Americans. 

Mr. SLAVITT. The plans available since the Affordable Care Act 

are at much better benefits than prior to the Affordable Care Act. 

Mr. SHIMKUS. Let me ask the second question. If you like your 

doctor you will be able to keep it with no changes prior to the Affordable Care Act and now no. 

Mr. SLAVITT. I think it’s always been true that physicians and 

health plans continually change their relationships—— 

Mr. SHIMKUS. There are limited provider networks or you will 

pay extra, so that is no longer true. Are premiums lowered by 

$2,500 for a family of four? 

Mr. SLAVITT. I think if you are referring to the—— 

Mr. SHIMKUS. The promise by the President when he campaigned 

for this—— 

Mr. SLAVITT. I believe that analysis is that it’s lower than it 

would have otherwise been if it continued to grow. 

Mr. SHIMKUS. OK, then the answer is really no, premiums have 

increased. They haven’t decreased. The promise was premiums on 

average would decrease by $2,500 per family. Obviously premiums 

have gone up. The other promise was 80 or 90 percent of all Americans, the insurance will be stronger, better, and more secure. Do 

you think that is true? 

Mr. SLAVITT. Yes. 

Mr. SHIMKUS. Well, let me read you two notes from constituents 

of mine who obviously are living it. And these are follow-ups from 

meetings I had with the August break. 

Before this terrible bill I paid $78 a month for my child health 

care coverage premium and had a good plan. I now pay $167.44 a 

month and have a much worse plan with high out-of-pocket cost. 

He recently got tubes in his ears, a common procedure, and it cost 

63 

us over $5,000. That is why this is real to us and that is why we 

continue to have problems with the Affordable Care Act. 

Another constituent wrote—he is a retired senior, doesn’t qualify 

for Medicare yet. My wife and I pay a hundred percent of the premium cost for the Bronze plan we purchased through 

healthcare.gov. We had a Silver plan in 2015, but the cost of the 

plan increased roughly $400 a month—that is a premium increase—so we downshifted. 

Although retired, we do not yet qualify for Medicare and our investment income is too high to qualify us for subsidy assistance. 

On the surface that would seem to be a good thing, but we aren’t 

that far above the income cutoff and without a subsidy assistance 

these premiums are taking a large percentage of our income and 

it is getting worse over time. 

In 2015, we paid $14,000, almost 15, 14.9, which was 22 percent 

of our adjusted gross income. This year our premiums will total 

$15,369 which what I estimate to be about 23 percent of our income. We understand that our 2017 insurance companies in Illinois 

are requesting premium increases of about 30 percent. That would 

amount to a total annual premium of $19,980.32 for our Blue Cross 

Bronze plan that will be almost 30 percent of our income for premiums alone. 

So following up on the comments of my colleagues, we have a 

challenge and the premiums are up. And if you make the statement that the premiums are not up, then you disregard the fact 

that copays and deductibles are way up. So you keep siloed in premiums, premiums are going up that is not disputable, but you don’t 

talk about the deductibles and you don’t talk about the copays 

which are making it unaffordable for average income Americans 

under this health care plan and this health care policy. 

Mr. Slavitt, what do you consider to be a competitive market? 

What is your definition of competition? 

Mr. SLAVITT. So I grew up in Illinois. 

Mr. SHIMKUS. And to think about Illinois—— 

Mr. SLAVITT. Yes. 

Mr. SHIMKUS [continuing]. That is a good point, because before 

the Affordable Care Act we did not have a state public utility commissioner that set rates for health insurance. It was only after the 

Affordable Care Act. And we had a very robust, competitive market 

which we were proud about because our health insurance was driven by competition on price and quality without intervention of a 

government bureaucrat trying to dictate the terms of the negotiated agreement between a buyer and a seller. Go ahead. 

Mr. SLAVITT. Here’s what I could tell you. The uninsured rate in 

Illinois has dropped from about 15 1A1⁄2 percent to about 8.7 percent. I think that’s great news for the state. 

Mr. SHIMKUS. Are you disputing these numbers of my constituents that I mentioned in their stories? 

Mr. SLAVITT. Absolutely not. 

Mr. SHIMKUS. OK, I yield back my time. 

Mr. PITTS. The chair thanks the gentleman. I now recognize the 

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

questions. 

64 

Mr. PALLONE. Thank you, Mr. Chairman. I want to ask my questions of Mr. Slavitt, but I have to say I continue to be amazed by 

Republican attempts to suggest that things were better before the 

ACA. I mean, it is clearly not the case. 

Despite endless attempts by Republicans to repeal, undermine, 

and defund the law, the Affordable Care Act is making health coverage a reality for many Americans who didn’t have coverage before. Census data released yesterday found that the uninsured rate 

was at 9.1 percent in 2015, down from 16 percent in 2010, and according to recent CDC data the uninsured rate had dropped to a 

historic low of 8.6 percent in the first quarter of 2016. For the first 

time more than 90 percent of all Americans have health insurance 

and that is without the expansion of Medicaid in states like Texas 

mentioned by our ranking member Mr. Green. 

So Administrator Slavitt, can you put this reduction in the uninsured rate in historical perspective? How significant is this drop, 

and can you comment on how the different coverage provisions of 

the ACA have operated together to result in these gains in insurance coverage? 

Mr. SLAVITT. Certainly, and thank you for the question. My entire career, which was in the private sector, had not seen any 

meaningful reduction in the uninsured rate, so seeing the kind of 

numbers you talk about occur are incredibly gratifying and I think 

a sign of progress. And as you say we have more progress to make. 

There are still millions of people who live in states that haven’t 

chosen to expand Medicaid, and if they did the uninsured rate 

would be even lower. 

Mr. PALLONE. Well, let me ask you this. I don’t think there is 

any question that we have made great progress in providing coverage for individuals who were previously uninsured, but as the 

number of uninsured shrinks the remaining individuals who are eligible may be harder to reach. And it is incredible to me how many 

people still are not aware of the fact that they can go on the exchange and they have subsidies. 

Most people aren’t going to believe this, but within the last 6 

months I had one of my constituents come up to me and say, and 

ask me when the federal government was going to make available 

health insurance to those who don’t get it through their job. And 

I was like, well, we have the Affordable Care Act. You know, you 

can go on this exchange and you are eligible for a subsidy, because 

they gave me their information. And this was less than 6 months 

ago. It is just incredible. 

So according to some experts, many of the remaining uninsured 

are actually still unaware or confused about how federal subsidies 

are available to help them purchase insurance. So could you tell 

me, how is CMS recalibrating its outreach in enrollment strategy 

in order to communicate with these harder to reach populations? 

And also, am I correct in stating that more than 80 percent of 

individual market consumers were eligible for tax credits as are the 

majority of the remaining uninsured? So what is CMS doing to 

communicate with these individuals that there is a marketplace 

that they can get a subsidy? 

Mr. SLAVITT. So you’re exactly right. There are still several million individuals in this country who are eligible for health insurVerDate Nov 24 2008 15:23 May 10, 2017 Jkt 037690 PO 00000 Frm 00070 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-168 CHRIS
65 

ance, many of them, in fact most of them below $75 a month in 

premium and are still not aware. So we are extremely excited 

about open enrollment for this upcoming enrollment season that 

begins November 1st, and have a significant effort to make sure we 

figure out how to reach these new people and educate them. 

A lot of it really requires in-person assistance. Health insurance, 

particularly if you’ve never had it is very complicated and people 

are sometimes intimidated by it. But we do find as I have noted 

earlier that once people are covered their satisfaction is high and 

they can start to afford their prescription medicines. So really, we 

need to enlist people at the local level continually and we’re going 

to do that at this open enrollment. 

Mr. PALLONE. I don’t know. I don’t want to put words in one of 

my GOP colleague’s mouth, but I think it was Mr. Murphy who 

said something about reducing the amount of money that was 

available for state exchanges. And I don’t know if it is the same 

thing. Maybe that is not the pot of money that they use for outreach. 

But it disturbs me because I don’t want to see the GOP efforts 

to say, look, we have got to cut back on this or cut back on that, 

reduce the money for outreach. But you do have that money available, right? That is not going to run out, the money that you use 

for this kind of outreach? 

Mr. SLAVITT. That’s right. And that is indeed what I think states 

who run their own exchanges are accountable for. 

Mr. PALLONE. And so they will continue to have that money 

available for some in the foreseeable? 

Mr. SLAVITT. That’s right. They charge user fees typically or have 

other appropriations and they use it for that purpose. More is better. 

Mr. PALLONE. Thank you very much. 

Mr. SLAVITT. Thank you. 

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

the gentleman from West Virginia, Mr. McKinley, 5 minutes for 

questions. 

Mr. MCKINLEY. Thank you, Mr. Chairman. I think I am going to 

address my remarks primarily to Mr. Slavitt, if I could, please. 

Last fall I asked you if you could get back to us on why the premiums are so high in West Virginia. We have the seventh highest 

premium rate in the country. We have not heard back from you 

since last fall, almost a year ago. We are still waiting for that call 

about it, because we only have one exchange in the state and we 

have seen the premium increases logarithmically continue to increase. 

So I need that answer. I am expecting that answer. But I am 

also saying that look, this past year we had a 24 percent hike in 

our premiums and now they are—excuse me. That is what we had 

was 24, then this year there was approval of 32 percent increase. 

And this coming year we have had a small group trying to penetrate to give a second option to West Virginia and they are asking 

for a 49.8 percent increase, and from what we understand they are 

likely going to get it. 

66 

So my question in part to you is what is the incentive for the regulators in West Virginia or any other state to hold down premium 

increases if we are going to be subsidizing so many of them? 

Mr. SLAVITT. So thank you. I’d say on the one hand that the 

great news in West Virginia is that the uninsured rate has dropped 

from about 17 percent to about 7 1A1⁄2 percent. On the other hand 

as you point out, we are concerned with the cost of health care particularly in rural America. It has always been the case. This is not 

an ACA phenomenon. The lack of competition in some parts of the 

country are areas that we need to address. 

I think that some of the protections in the ACA do help speak 

to the issue you raise. So for example, if an insurance company 

were to charge too much they’re obligated to give back in rebates 

to the consumers. 

Mr. MCKINLEY. I don’t know how that ultimately breaks down, 

if I could. I don’t know how that breaks down, because they are 

continuing to make these hikes and I don’t think there is an incentive for the regulators to hold that down, especially if they are 

going to grant an increase of 50 percent hike with it. 

Let me give you an example and maybe you can work my way 

through this, because it is going to work out she is going to have 

to have a subsidy again which falls back into why keep the premiums down if you are going to give them a subsidy. A 60 year old 

lady who is working, her husband just lost his job, and she was 

covered under his insurance policy. She was covered under his, so 

now she doesn’t have insurance coverage. And in the past what she 

would have done—wait, she is 62. He is retired and he went on 

Medicare. She doesn’t have coverage. 

When we spoke to her she said, I would have gotten catastrophic 

coverage but I can’t do that. I am not permitted to under the ACA, 

so now I have to go out and buy coverage. And it is going to cost 

her. The cheapest rate she could get was $800. That means it is 

$9,600 a year she is going to have to pay. But then I guess what 

you are going to say, you are going to step in and say, well, we are 

going to provide her premium. We are going to give her a subsidy 

to this; is that correct? 

Mr. SLAVITT. What I’d say is I don’t know this particular situation, glad to look into it. But I would say that for most people in 

America who are in that situation they just prior to the ACA 

weren’t guaranteed access to insurance, particularly if they were 

one of the 129 million Americans who had a preexisting condition. 

So we think that’s a really critical advance. We know that costs 

matter. We think the subsidies are important. We think the subsidies are a critical part of the law. 

Mr. MCKINLEY. I appreciate it. I hope that we can do something, 

because at $10,000 a year that is after taxes, how much she would 

be dedicating her income in that what she is making it is not a lot 

of money. But let me switch horses entirely on the thing—and I 

hope that you can get back to me on this other matter because you 

haven’t the first time—but, and that is that we are site-neutral. 

We have got a hospital complex in West Virginia that has been 

trying to get a permit for numbers of years. It took them several 

years to get this permit to build an ancillary hospital facility nearby. And as a result of being held up because of the government for 

67 

water permits and road permits, environmental permits, it didn’t 

occur until after November of 2015. 

And now as a result of that by virtue of them now having invested $30 million into this under the site-neutral plan they will 

lose $4 1A1⁄2 million of revenue for that hospital. I am asking if you 

can get back to us or have a conversation with us about how much 

more flexibility we can have to go beyond that because it was not 

of their doing. This was an arbitrary date of November of 2015 that 

was established. 

And I really would like to hear this because it is going to have 

an impact. That $4 1A1⁄2 million it is going to cost, it is going to 

be borne by somebody else. And that is once again in rural America 

what it is going to impact is where we have the cost shifting, and 

it doesn’t have to happen if we could just have a little flexibility 

in dealing with that site-neutral deadline date. Can you get back 

to me? 

Mr. SLAVITT. Yes. And I think as you’re aware we’re in the middle of a rulemaking process, so glad to get back to you and listen 

to comments, and particularly in this particular hospital situation 

make sure we understand all the details. So yes, we’ll get back to 

you. 

Mr. MCKINLEY. Very soon. Thank you very much. I appreciate it 

and yield back. 

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

the gentlelady from California, Ms. Matsui, 5 minutes for questions. 

Ms. MATSUI. Thank you, Mr. Chairman. I want to thank the witnesses for being here today. I have some few facts from California. 

The Affordable Care Act makes significant investments to improve 

the health of our nation and for Californians. I would like to highlight a few of these benefits. 

Since last November over 1.5 million individuals in California 

have gained coverage through the health insurance marketplace. 

Because of the ACA there are 78,000 children in California that 

cannot be denied health coverage because of preexisting health condition. Between 2013 and 2014, the uninsured rate in California 

dropped by over 6 percentage points from 21.6 percent in 2014 to 

15.3 percent in 2013. 

And as the CDC reported last week, the national insurance rate 

is now at a historic low. Under the ACA health insurance companies must spend at least 80 percent of premium dollars on health 

care or improvement to care as opposed to administrative costs like 

salaries or marketing or they have to issue a refund. As of 2015, 

more than 490,000 Californians with private insurance coverage 

benefited for more than $11 million in refunds. 

The Affordable Care Act is doing great things in California and 

I am proud to see that. We see how Medicaid expansion has helped 

to bring the uninsured rate to its current historic low. Gallup data 

from earlier this year found that seven of the ten states with the 

largest reductions in uninsured rates were Medicaid expansion 

states. Gallup also found that states that have not expanded Medicaid were less likely to see improvement in their uninsured rates 

compared to states that have expanded coverage. 

68 

Unfortunately we are seeing a widening gap in the uninsured 

rates between expansion states and non-expansion states. Administrator Slavitt, do you expect that trend will continue in the states 

that continue to choose not to expand Medicaid? 

Mr. SLAVITT. Yes, I do. 

Ms. MATSUI. Administrator Slavitt, if all states chose to expand 

Medicaid do you imagine that we will see the uninsured rate drop 

even lower than where it is now? 

Mr. SLAVITT. Yes, I think there’s three to four million people easily that would be covered. 

Ms. MATSUI. Thank you. We also know there are many other 

benefits to expanding Medicaid. For example, premiums on the individual insurance market on average 7 percent lower in states 

that have expanded Medicaid. I am hopeful that we can see the uninsured rate continue to drop and I hope more states do right by 

their citizens by choosing to expand Medicaid. 

Now every time one provision of the ACA has a bump in the road 

we hear from our Republican colleagues that this is the end of 

health reform. But the fact is that the law is confirming benefits 

on millions of Americans across the country and it is important to 

put these issues in context. 

Administrator Slavitt, we have heard that 2017 is a transition 

year for the marketplace. Why might we be seeing higher premium 

increases in 2017 than we saw in previous years? 

Mr. SLAVITT. So I think there’s two principal reasons and both 

of them I think are one-time effects. The first is that the law created a 3-year reinsurance pool that expires this year, so by definition that will increase premiums pretty meaningfully. Secondly, it’s 

a fact that in the first couple years of the exchange the insurers 

priced without having data on what the claims costs would be. 

They now have that data. 

I think in many cases in many states they’ve found that they’ve 

priced too low and I think are asking for and receiving some justifiable rate increases. But again the good news is medical cost trends 

across the country are very low, so once these one-time effects kick 

in, I think our expectation is that we will see a very normalized 

continued low rate of growth. 

Ms. MATSUI. Now as the insurance market adjusts, the ACA has 

other measures in place like tax credits to keep premium affordable 

and provide choices for consumers. My understanding is that the 

majority of current marketplace consumers, in fact, benefit from 

these financial assistance measures. 

Administrator Slavitt, how will these mechanisms including tax 

credits and the opportunity to shop around for different plans help 

consumers find affordable coverage as the market stabilizes? 

Mr. SLAVITT. I think when consumers learn that the vast majority of them are able to purchase coverage for $75 a month or less 

in premiums, it is absolutely astounding to them given the amount 

of financial security and health security that they’ve never been 

able to obtain before in their lives have had. So we think during 

the fourth open enrollment we’re really eager for people who 

haven’t yet heard about the marketplace and understand those 

benefits to come back. 

Ms. MATSUI. Oh, I thank you and I yield back. 

69 

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

the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

Administrator Slavitt, on Friday last, CMS issued a five paragraph memo on risk corridor payments for 2015. Several insurance 

companies are suing the Administration over 2014 payments because they only collected 12.6 percent of what the industry requested to be made whole. In the last paragraph of the memo, your 

agency wrote, and I quote, as in all cases where there is a litigation 

risk, we are open to discussing resolution of those claims. We are 

willing to begin such discussions at any time, end quote. 

Does CMS take the position that insurance plans are entitled to 

be made whole on risk corridor payments even though there is no 

appropriation to do so, yes or no? 

Mr. SLAVITT. I think what we’ve always said is that the risk corridor payments are an obligation of the federal government and I 

think that—— 

Mr. GRIFFITH. Yes or no? 

Mr. SLAVITT. I think that statement’s just standard practice. 

Mr. GRIFFITH. So it is yes? 

Mr. SLAVITT. I’m sorry. Can you rephrase the question for me 

and I will—— 

Mr. GRIFFITH. I will restate it. Does CMS take the position that 

insurance plans are entitled to be made whole on risk corridor payments even though there is no appropriation to do so? And I took 

your answer as a yes; am I correct? 

Mr. SLAVITT. Yes. It is an obligation of the federal government. 

Mr. GRIFFITH. So it is a yes? Just waiting to hear you say yes. 

Mr. SLAVITT. If that’s how you interpret that. Yes, sure. 

Mr. GRIFFITH. Seriously? All right. Do you intend to use the judgment fund to make the risk corridor payments to insurance plans? 

Yes or no? 

Mr. SLAVITT. I would say that further questions are—I would not 

be comfortable commenting on any current legal proceedings and 

I’d prefer to—— 

Mr. GRIFFITH. You did an invitation to settlement. There is no 

appropriation for the funds. Are you intending to use the judgment 

fund, yes or no? 

Mr. SLAVITT. Again this is a case before Justice and so I’d be 

more comfortable not talking publicly about that. 

Mr. GRIFFITH. So what you are saying is is that you have turned 

this over to Justice and you have talked to the Justice Department 

about the various suits? 

Mr. SLAVITT. I personally have not. 

Mr. GRIFFITH. You have not. Can you get me the names by the 

16th of September, because this is time-sensitive. Can you get me 

the names of those people that have spoken with Justice about this 

matter? 

Mr. SLAVITT. Sure. 

Mr. GRIFFITH. Thank you. I appreciate that. Now which insurance plans are suing or have indicated they intend to sue CMS or 

the United States in relationship to the risk corridor payments? 

Mr. SLAVITT. I don’t have a list with me, so I can get that to you. 

70 

Mr. GRIFFITH. And again because it is time sensitive can you get 

me a list by September 16th? 

Mr. SLAVITT. Absolutely. 

Mr. GRIFFITH. I appreciate that very much. Now you indicated 

you haven’t spoken to Justice, but do you know of anyone in your 

Department that has discussed settlement plans with the Department of Justice? 

Mr. SLAVITT. I know that our general counsel speaks to Justice 

regularly, so I assume that they have but I don’t know any detail. 

Mr. GRIFFITH. Well, I am assuming that you authorized the 

memo that I quoted earlier where you created an invitation to settle. I would assume that you know that there were some discussions with Justice prior to making an invitation to settle with these 

companies; is that not correct? 

Mr. SLAVITT. That’s correct. 

Mr. GRIFFITH. That is correct. So there have been discussions by 

somebody with Justice about how you are going to settle and you 

don’t know where the money is going to come from, but you assume 

somewhere it will come from. 

Mr. SLAVITT. Yes. They’re representing us so we in fact have 

talked to them. Yes. 

Mr. GRIFFITH. All right. I am curious. Have you had any conversations about the lawsuits with your predecessor who is now a 

top representative for the insurance industry about the risk corridor situation? Yes or no. 

Mr. SLAVITT. No. 

Mr. GRIFFITH. And prior to issuing the memo, and I touched on 

this briefly but I want to make sure I am clear. Prior to issuing 

the memo, did Justice Department approve the memo that you released on Friday which had an invitation in the last part of it to 

settle the lawsuits? 

Mr. SLAVITT. I believe they reviewed the language, yes. 

Mr. GRIFFITH. All right. And has CMS spoken with any insurance plan directly or indirectly about settlement of the risk corridor 

lawsuits? Yes or no. 

Mr. SLAVITT. CMS has had inquiries from insurance companies 

which we’ve then referred over to Justice. 

Mr. GRIFFITH. And do you remember which insurance companies 

they were? 

Mr. SLAVITT. I can get you that. 

Mr. GRIFFITH. If you can get me that by September 16th I would 

greatly appreciate it—— 

Mr. SLAVITT. OK. 

Mr. GRIFFITH [continuing]. Because it is a time-sensitive matter, 

as you can imagine. 

Mr. SLAVITT. OK. 

Mr. GRIFFITH. I do appreciate that. With the last few seconds 

that I have I am going to switch gears a little bit. And I have heard 

a lot of folks talk about the uninsured. One of the problems that 

I am having when I get my complaints in my district about 

Obamacare is underinsured; that with the copays and the 

deductibles and in order to afford the insurance because the rates 

have gone up, my folks are having to pay high deductibles. 

71 

They in essence don’t have significant enough insurance, and 

when a catastrophic illness or injury occurs they are finding that 

they are having to sell off assets that they have had to work for 

for years including homes, et cetera. And I am just wondering, does 

anybody keep numbers on those who I would call the underinsured? They may have a plan but not one that keeps them from 

being financially crippled should they have a catastrophic illness or 

injury. 

Mr. SLAVITT. Yes. The most recent numbers that I’ve seen despite the headlines show that in 2015 on the exchange the median 

deductible was $850, which was a decrease from the prior year 

where it was $900. 

Mr. GRIFFITH. And all I can say, Administrator Slavitt, to that 

is that when folks come up to me at the New River Valley Fair, 

who are average hardworking folks in a relatively poor district, 

that is not what they are telling me. My time is up. I yield back. 

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

the gentleman from Kentucky, Mr. Yarmuth, 5 minutes for questions. 

Mr. YARMUTH. Thank you very much, Mr. Chairman. I thank the 

witnesses for appearing. This does sound a lot like the movie 

Groundhog Day. We have been through all of these arguments before and it becomes very frustrating. This hearing has a new title, 

The Affordable Care Act on Shaky Ground, and I would submit 

that if it is on shaky ground it is because Republicans both in Congress and across the country where they have the authority are 

planting dynamite in the ground under the system. 

And I think that is why all of my colleagues have talked about 

the fact that we continue to ignore the incredible progress that has 

been made under the Affordable Care Act, not only the number of 

people who have been insured who were previously uninsured but 

also the people who have been protected now against significant financial loss or even unnecessary debt because they have coverage. 

I want to talk about my state though. And in the chairman’s report, the CMS’s regulation of exchanges and so forth, it makes 

some statements about Kentucky’s exchange that I think dramatically mischaracterized what has gone on there. The last time you 

were here I asked you a question because I knew our new governor 

at that time had promised to dismantle Kynect, our state exchange, 

during his campaign. And I asked you if you could think of any 

way in which any Kentucky resident would be better off on the federal exchange than the state exchange, and you answered you 

couldn’t; is that correct? 

Mr. SLAVITT. That’s right. 

Mr. YARMUTH. That is right. Do you think that anything happened in Kentucky between that answer and the time that Governor Bevin actually submitted his request or notification to you 

that he was going to disconnect Kynect to make that different? 

Mr. SLAVITT. Not to my knowledge. 

Mr. YARMUTH. And in fact, the reason he did that was not because of any reason that made sense either economically or in 

terms of providing service for our citizens, but because he has an 

ideological opposition to Kynect and promised to do it during the 

72 

campaign. You don’t have to answer that; that is my characterization. 

But now what he is doing is even worse, because while we had 

the most successful change, arguably, in the country that he has 

basically dismantled, we also have one of the most dramatic increases in, or reductions in uninsured because of expanded Medicaid. More than 400,000 Kentuckians now have coverage who 

didn’t have it before. 

And what Governor Bevin has done now is made a proposal for 

a waiver to change a lot of the Medicaid system in Kentucky. He 

has made a proposal to CMS which he counseled with you before, 

you and your staff, before he made the proposal in which you told 

him what might be acceptable and what might not be acceptable 

under the proposal; is that not correct? 

Mr. SLAVITT. We did have a dialogue, yes. 

Mr. YARMUTH. And in spite of that he has submitted a proposal 

to you which I think according to the law you are almost obligated 

to reject. On Page 15 of that proposal he says if this demonstration 

project is not approved I will dismantle Kynect. I will dismantle 

the Medicaid expansion in my state. 

So what he is doing is setting up for you to reject the proposal 

and then he is going to dismantle Medicaid expansion in Kentucky, 

take insurance away from 400,000 of our citizens, jeopardize many 

providers who are now being compensated for the care they provide, and he is doing it again for ideological reasons. 

So the point I want to make is that yes, there are a lot of problems and a lot of things going on in this state, in this country right 

now that may call into question the Affordable Care Act. But the 

things that are going wrong are things that Republicans are doing 

to sabotage the functioning of the act, the law. 

And that is why we are so frustrated that instead of offering suggestions to improve the ACA—which we could in many, many 

ways; we all agree on that—the Republicans in Congress again 

hold hearings like this, vote time and time again, more than 60 

times to repeal the ACA, and have never proposed an alternative 

that is anything but going back to where we were before the ACA 

when insurance companies controlled the system. 

They want to throw it back in the private system. That is what 

Matt Bevin says he wants to do in Kentucky as if that is some 

noble objective. And the reason that they have not proposed a viable alternative to the ACA other than going back to the pre-ACA 

situation, I am convinced, is because the only other alternative is 

single payer. And if you listen to virtually every complaint that is 

raised during this hearing today and then every other hearing, 

those complaints would not exist under a single payer system. 

Now I don’t think anybody is ready to go there right now. We are 

going to end up there eventually, but I think we ought to start 

being honest with the American people about what the options are 

available to them and how important the ACA’s success is to them 

as well. I yield back. 

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

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

73 

Mr. LONG. Thank you, Mr. Chairman. And Mr. Slavitt, is it true 

that the current CEO of the federal exchange healthcare.gov is 

Kevin Counihan? 

Mr. SLAVITT. Yes, sir. 

Mr. LONG. It is also my understanding and I am sure you are 

aware that he was invited to testify here today but did not come. 

Do you know why he is not here? 

Mr. SLAVITT. He’s on travel today, sir. 

Mr. LONG. I am sorry? 

Mr. SLAVITT. He’s traveling today, sir. I believe he’s in South 

Carolina. 

Mr. LONG. South Carolina. 

Mr. SLAVITT. That’s my understanding. 

Mr. LONG. OK. Do you have any idea of where he was back on 

the September 6th or 7th, whenever Arizona, the same day that 

Arizona’s Blue Cross Blue Shield mysteriously decided to sell plans 

in Pinal County? Do you know if he would have been in Arizona 

at that time? 

Mr. SLAVITT. I don’t know his schedule on September 6th or 7th. 

Mr. LONG. OK. Can you tell me if Mr. Counihan has had conversations with Blue Cross Blue Shield of Arizona or Connecticut 

after the deadline to sell plans on the federal exchange? 

Mr. SLAVITT. I don’t know the timing, but I’m sure he’s had conversations with most of the major health plans. 

Mr. LONG. What was the first part of your answer? I am sorry. 

I couldn’t hear you. 

Mr. SLAVITT. I can’t tell you the dates, but I’m sure he’s had conversations with many of the major health plans. 

Mr. LONG. But you don’t know whether or not he has had conversations after the deadline? 

Mr. SLAVITT. I don’t have any knowledge of the dates he’s had 

conversations. 

Mr. LONG. OK. Have you yourself had conversations with Blue 

Cross Blue Shield of Arizona or Connecticut Care after the deadline to sell plans on the federal exchange? 

Mr. SLAVITT. No. 

Mr. LONG. No negotiations after the deadline is passed? 

Mr. SLAVITT. I have not. 

Mr. LONG. OK. Is it fair to say that both carriers were allowed 

to sell plans after your own deadline? 

Mr. SLAVITT. I’m not sure. I don’t know. 

Mr. LONG. You are not sure that Pinal County was offering to 

sell plans? 

Mr. SLAVITT. I’m not sure which deadline you’re referring to, but 

I’m happy to investigate and we will then get back to you. 

Mr. LONG. OK. I would appreciate if you would. So you are aware 

or not aware that deadlines have been passed and then plans were 

offered after these deadlines passed; you are aware of that or not 

aware of that? 

Mr. SLAVITT. Well, I’d have to understand what deadlines you’re 

talking about. I mean, we certainly give—— 

Mr. LONG. Sell the plans, but—— 

Mr. SLAVITT. We certainly give states dates in which we’d like to 

receive things. Sometimes if we don’t receive them on those dates 

74 

I’m sure that we extend those deadlines, but I don’t know that in 

this particular situation that that’s occurred. But that certainly 

wouldn’t be absolutely out of the question. 

Mr. LONG. OK. But do you have any idea why there would be 

deadlines if the deadlines are not followed? 

Mr. SLAVITT. Well, yes. Typically our team has to do work like 

loading plans and loading data and they like to have enough time 

to do that and do it right. But certainly we’re going to always do 

what’s in the best interest of the consumers and the Americans in 

the state to make sure that they have coverage options available. 

So if our team has to work a little harder or work over the weekend in order to do that that’s the kind of dedication that we have 

on our team. 

Mr. LONG. OK, thank you. In my district in August I had the opportunity to visit with a large school board there in the district, 

and I was kind of surprised at the end of the meeting when the 

chief financial officer that has been with the school district 33 

years looked at me and volunteered that she said, I was thinking 

last night if I could ask you to do one thing for me as congressman 

that one thing would be to get rid of Obamacare. 

And that honestly shocked me. Two of the more pressing problems with the law that she referred to were the 30-hour work week 

and the 26-week break for retired teachers. The 30-hour work 

week, also known as employer mandate, requires all businesses or 

organizations with 50 or more employees to provide health insurance for their employees who work more than 30 hours a week. 

This particular school district currently has 921 full-time staff. 

The 26-week break is required for educational organizations that 

are unable to provide health insurance to faculty that recently retired. If ignored, the retired teacher would be seen as a continuing 

employee which would require them to offer health insurance. 

These are the teachers, the retired teachers that know the children in those schools. They know the school, they know the system. 

They know the teachers and they have to take a 26-week break because of this law. 

And Mr. Chairman, I write a weekly column called Long’s Short 

Report and it just happened that today in our local paper, the Gannett paper, the Springfield News-Leader published my latest column on this very subject about my trip to the school district. So 

without objection, I would like to offer that into the record and I 

would encourage everyone to read that; get more of the details of 

how this law has affected school systems and small businesses. 

Mr. PITTS. Without objection, so ordered. 

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

Mr. LONG. I yield back. 

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

the gentlelady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Well, thank you, Mr. Chairman, and thank you to 

the witnesses for being here today. The progress that we have 

made since the adoption of the Affordable Care Act has been very 

significant. And before we turn to questions I wanted to focus on 

how meaningful it has been to my neighbors back home in the 

state of Florida. 

75 

In Florida we are fortunate. We have a very competitive marketplace so families and consumers have a lot of choices. They have 

good affordable options. In fact, it looks like in the coming year 

that 82 percent of marketplace consumers in Florida will be able 

to purchase coverage for less than $75 per month. 

During the last open enrollment period, 1.7 million Floridians 

signed up for coverage in the health insurance marketplace including over one million women and children. And this is important because we have very serious and growing concerns in Florida because of the spread of the Zika virus. The current Zika infection 

count in Florida is 800 individuals, including 86 pregnant women 

that we know of, so this is very concerning. 

And what is especially troubling now is that Florida hasn’t expanded Medicaid. So even though we have over 250,000 women 

ages 18 to 34 in my state who have gained quality affordable coverage in the marketplace, we have got more than that that should 

be covered, could be covered if the state expanded Medicaid. So you 

can see why this is particularly troubling at a time of a growing 

public health crisis. 

But there is a lot of good news too. Over 3.1 million seniors are 

eligible for free preventive health services with no deductibles or 

copays and they are taking advantage of it. In 2014 alone, over 

346,000 seniors in Florida received Medicare Part D prescription 

drug discounts worth over $306 million, or on average $884 back 

into the pockets of beneficiaries. 

It is interesting that more than 38 percent or about 383,000 returning healthcare.gov consumers last year switched plans. And 

this is something that we could work on in a bipartisan way. It is 

very interesting. I guess we knew that Americans love to shop and 

compare and they are doing that. But we have got to work together 

to maintain these competitive marketplaces so they have the ability to do that. When they switched they saved on average about 

$34 per year. 

And then for the vast majority, about 60 percent of Floridians already have health insurance through their employers and I thought 

it was quite interesting that there the insurance premiums in Florida are now growing at the slowest rates on record. This is also 

something we have got to continue to analyze and make sure that 

this is the case overall. 

But I would like to return to the Medicaid expansion challenge, 

because in the state of Florida we have got so many that are falling 

into the gap. And, you know, we know it is fiscally irresponsible 

not to expand Medicaid. We know the most important thing we 

could do for mental health coverage is to expand Medicaid. 

But there is a new piece of data that Administrator Slavitt, I 

would like you to address. Medicaid expansion brings down marketplace rates. You said it brings down premiums by 7 percent. Is 

that just in the marketplace, is that overall and what is behind, 

what is going on in pressure in the marketplace? 

Mr. SLAVITT. Well, no, that 7 percent is in the marketplace, and 

I think, for everyone here who has an interest in helping all of your 

constituents and all of their concerns about affordability that’s really one of the top most important things that can be done is to 

eliminate all those places where people are uncovered. 

76 

And a lot of those people who don’t get coverage through Medicaid sometimes find their way onto coverage in the marketplace 

and that drives up costs needlessly. So it’s a critical priority that 

we complete the job and expand Medicaid wherever we can. 

Ms. CASTOR. And one of the things that drives a lot of businesses 

and the folks of the Florida Chamber crazy is we are sending so 

much money up to the federal government because Medicaid is a 

state-federal partnership. We are not bringing those dollars back 

and putting them to work creating jobs and taking care of people. 

What happens to those dollars? 

Mr. SLAVITT. Well, they certainly go to the states that have chosen to expand Medicaid. And I will just add one thing for, Congressman Yarmuth raised the question of Kentucky. There was a 

very interesting study in Kentucky a couple years ago which, I 

think, showed that Kentucky saw 40,000 new jobs and something 

to the effect of $30 billion improvement to the state economy 

through 2021 in the expansion of Medicaid. So you can imagine the 

economic benefits on top of which you’re already talking about are 

quite large. 

Ms. CASTOR. Thank you very much. 

Mr. PITTS. The lady yields back. The chair now recognizes the 

gentleman from Indiana, Dr. Bucshon, 5 minutes for questions. 

Mr. BUCSHON. Thank you, Mr. Slavitt, for being here. This is directed at you. On mandates in the Affordable Care Act I want to 

talk about the age rating ratio. Many states are using a five-to-one 

ratio before 2010, meaning the most expensive plan can only cost 

five times more than the least expensive plan when it comes to patients’ ages. 

In my home state of Indiana we didn’t have an age rating mandate. The President’s plan moved this to three-to-one for all states 

regardless of their unique patient needs. This has led to sicker insurance pools and driven younger, healthier patients away from 

the marketplace, in my view. The baseline has increased, so the argument that the three-to-one ratio saves seniors money may not be 

true. In fact, I don’t think it is true. It has just increased costs for 

younger people. 

So my question would be, is would moving the ratio back to fiveto-one have an immediate impact on the cost, do you think, for 

many people who would potentially enroll? 

Mr. SLAVITT. No, I think this would have to be studied based 

upon two factors. What does it do to the economics or the cost and 

what does it do to the coverage and who benefits and who doesn’t? 

So I think it’s the kind of proposal that should be thoughtfully 

evaluated. I have not done that. 

Mr. BUCSHON. OK. Would moving the ratio back to five-to-one attract younger, healthier patients to the plans? And the reason I say 

that is because according to CBO, ‘‘average spending among people 

who are 64 years or older is about 4.8 times as high as average 

spending among people who are 21 years old.’’ That is cost to the 

health care system. So to me it would make sense if you could shift 

the baseline back and get the cost down for younger people, you 

would get more people into the plans and that might help balance 

the demographics, right? 

77 

Mr. SLAVITT. Yes. That could be one of the benefits. I haven’t 

seen any studies on the topic, but—— 

Mr. BUCSHON. Well, I would encourage you to look at that because I actually have legislation to actually to allow states to do 

that because that is the premise. 

A couple other questions on global surgical payments in MACRA, 

the replacement for the SGR, our language authorized CMS to use 

a representative sample of docs for reporting data on 10- and 90- 

day global surgical codes. But the most recent physician fee schedule is requiring all docs that perform relative procedures to report 

under the claims analysis section. And this is, in my view, not in 

line with the intentions of Congress in MACRA. 

So what we need really is an appropriate representative sample. 

How the data is collected must change. The 10 minute reporting increments is, I can tell you as a surgeon—I was a surgeon before— 

is actually, it is impossible. So what I am asking for is for CMS 

to give time to work with surgical societies and other stakeholders 

to determine what is an accurate representative sample. This is 

really important. So what I am asking is can you commit, or whoever at CMS is responsible for this, to working with my office and 

other stakeholders to work this through? 

Mr. SLAVITT. Absolutely. As you can imagine we’ve gotten a lot 

of feedback on this proposal. It’s a proposal that I think we’re still 

working through the comment period. But we absolutely need that 

input and we are committed to coming out with a final rule which 

does get that right. 

Mr. BUCSHON. Well, that is really important because what we 

want is accurate data, right? At the end of the day we want accurate data. 

Mr. SLAVITT. Right. 

Mr. BUCSHON. One final question on the proposed rule for Medicare Part B model, I am very concerned by statements from the 

physician community that practices may be forced to send patients 

to hospitals to receive care, particularly oncologists particularly because hospital-based care can be more costly for beneficiaries. 

I have seen estimates that suggest that even 15 percent of cancer 

treatment, for example, shifted to the hospital would actually cost 

Medicare an additional $200 million. And the intent of this was to 

try to get down drug costs for people, and I understand that. There 

is bipartisan concerns to this rule, proposed rule, as you know, so 

what I would suggest is I would urge CMS to hold off on the rule 

until we can resolve some of these issues. 

So the question I have is did CMS factor in the potential cost increase into its estimated savings from the program when it developed the proposed rule? 

Mr. SLAVITT. So I think putting the proposal together we were, 

in fact, looking for that exact type of feedback relative to consequences and unintended consequences of anything we test. We’ve 

got a lot of feedback. We will take that feedback, including the specific feedback that you’ve mentioned which we have heard, into account when we finalize this. 

Mr. BUCSHON. Well, I will appreciate that. And so if you do have 

an analysis of that different than what I suggested, on the inVerDate Nov 24 2008 15:23 May 10, 2017 Jkt 037690 PO 00000 Frm 00083 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-168 CHRIS
78 

creased costs because of shifting care to hospitals, if you could 

share that with my office and the committee I would appreciate it. 

Mr. SLAVITT. OK. We will look into that. 

Mr. BUCSHON. I yield back. 

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

the gentlelady from Illinois, Ms. Schakowsky, 5 minutes for questions. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. And I want to 

apologize to members of the panel. I was at another subcommittee 

hearing and was able to just arrive, but I thank you for being here 

to testify. 

I wanted to just highlight some of the benefits of the Affordable 

Care Act to my state of Illinois. During the third enrollment period 

388,000 people from my state were able to gain coverage by enrolling in the health insurance marketplace. In 2014, nearly 195,000 

people in Illinois with Medicaid saved almost $180 million on prescription drugs because of the Affordable Care Act with an average 

per person of $925 per beneficiary. That is a big deal. 

In 2015, the ACA funded 44 community health care centers in 

Illinois that provide primary and preventive health care to over 1.2 

million Illinoisans including over 300,000 children and 900,000 racial and ethnic minorities. Over 475,000 Illinoisans have gained 

Medicaid of CHIP coverage since the first open enrollment period 

as a result of Illinois’ decision to expand Medicaid, and since November of last year, 200,000 Illinois women gained access to preventive health care services with no cost sharing including reproductive health care, domestic violence counseling, and screening for 

cervical cancer. 

Despite the challenges that we are facing in Illinois, this law is 

doing incredible things for my constituents and I am encouraged by 

the progress that we are seeing. 

Mr. Slavitt, I wanted to talk to you about the increase in the cost 

of prescription drugs. How have rising drug costs, rising drug 

prices led to increases in insurance premiums and should we be 

doing more to control growing the cost of pharmaceuticals? 

Mr. SLAVITT. This is an incredibly important question, Congresswoman, because when people are concerned as they should be 

about the cost of health insurance because the law requires that 85 

percent of the cost be actual cost of health care, what they’re really 

concerned about is the cost of the underlying health care system 

which is a top priority for us. 

And prescription drugs and the insecurity that both seniors as 

well as people on lower incomes face when they can’t afford their 

prescription drugs is a really significant issue and it’s only getting 

worse. And we are troubled when we see large increases in prescription drug costs and we have proposals for it as you know to 

attempt to find ways to begin to control those costs in ways that 

still allow us to create cures and innovations for our country, but 

also allows those cures and innovations to be accessible to everybody in the country who needs them. 

Ms. SCHAKOWSKY. Right. Also CMS has taken action I know to 

increase transparency for the price of drugs. For example, last year 

CMS released the Medicare Drug Spending Dashboard which details the price paid for many drugs covered by Medicare Parts B 

79 

and D. The Dashboard also includes the average annual price increase of each drug and the average annual cost to beneficiaries. 

And this data is incredibly helpful for policymakers and providers 

to gain a better understanding of how drug prices are impacting 

public health programs and consumers. 

So Mr. Slavitt, why is increased transparency for drug pricing 

important and how will this information allow us to better protect 

Medicare, Medicaid and the beneficiaries? 

Mr. SLAVITT. Well, first of all, these are federal dollars that we 

are spending and so, these in effect are people that are contractors 

to the federal government, and so it’s important that taxpayers 

have insight into what we’re spending our money on. 

And because we are not, as you know, able to negotiate Part D 

prices because we’re restricted to, we think it’s important at least 

that there is visibility into what things cost and particularly when 

there’s cost increases, because in effect that’s at the heart of many 

of the concerns, I think, even at this hearing today. As some of 

those underlying costs go up people then see their insurance premiums go up and that’s what they have to deal with, so we’re trying to bring more visibility to the root cause as opposed to just the 

headline issues. 

Ms. SCHAKOWSKY. Thank you and I yield back. 

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

the gentleman from Florida, Mr. Bilirakis, 5 minutes for questions. 

Put your mike on, please. Thank you. 

Mr. BILIRAKIS. Sorry about that. Administrator Slavitt, last December HHS OIG issued a report titled, CMS Could Not Effectively 

Ensure That Advanced Premium Tax Credit Payments Made 

Under the Affordable Care Act Were Only for Enrollees Who Paid 

Their Premiums. 

In the report, OIG stated that CMS was paying advanced premium tax credits based on the attestation of the insurance companies without verifying on an individual level that the monthly premiums were being paid. The OIG recommended that CMS institute 

an automated policy-based payment process to verify premium payments on a monthly or real-time basis. 

Yes or no, please, has CMS instituted automated policy-based 

payment process with insurers for the federal marketplace? 

Mr. SLAVITT. Yes. 

Mr. BILIRAKIS. OK, thank you. Are the state-based exchanges 

using an automated policy-based payment process at this time? 

Mr. SLAVITT. I’d have to check. 

Mr. BILIRAKIS. Please check. Does CMS have any plans of running the policy payment process against prior years to find individuals who may have improperly claimed cost sharing reductions and 

premium tax credits when they were not current on their payments? 

Mr. SLAVITT. I’m not sure if that’s even possible, but I’d be glad 

to get back with you. 

Mr. BILIRAKIS. Please get back to us. I understand that the state 

exchanges are not participating, but I need clarification on that so 

please get back to me. Does CMS have a legal obligation to recoup 

advanced premium tax credits or cost sharing reductions that were 

80 

improperly claimed or paid? Do they have a legal obligation? Do 

you have a legal obligation, CMS? 

Mr. SLAVITT. So I think it depends on the circumstances, but 

some of this is under the provenance of the IRS. 

Mr. BILIRAKIS. OK. Well, again I want more clarification on that 

please. 

Ms. Jarmon, has the OIG tested the automated policy payment 

process that CMS is using? 

Ms. JARMON. Not yet. As part of our ongoing work I should mention we reported on it in December of 2015. As part of our followup on the open recommendations we’ll be looking at that. 

Mr. BILIRAKIS. When will you be looking at it? 

Ms. JARMON. As part of our work in 2017. 

Mr. BILIRAKIS. In 2017? 

Ms. JARMON. Right. We’re looking at it now but—— 

Mr. BILIRAKIS. So early part of ’17? 

Ms. JARMON [continuing]. It will be reported on sometime in 

2017. 

Mr. BILIRAKIS. Early part of ’17 or—— 

Ms. JARMON. Probably sometime during the first part of ’17, yes. 

Mr. BILIRAKIS. I am going to keep track of that. 

Mr. Slavitt, when CMS instituted this policy-based payment 

process for the federal marketplace how much did you find enrollment reduced? Can you give me that answer? 

Mr. SLAVITT. I don’t know. I don’t know that it was material, but 

I’m certainly glad to get back to you on what that is. 

Mr. BILIRAKIS. OK. Well, all right. Again I want to follow up so 

let’s get together soon. I need these answers. 

Mr. SLAVITT. OK. 

Mr. BILIRAKIS. Thank you very much, and I will yield back, Mr. 

Chairman. 

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

the gentleman from Oklahoma, Mr. Mullin, 5 minutes for questions. 

Mr. MULLIN. Thank you, Mr. Chairman. And Mr. Slavitt, thank 

you again for being here. I know you and I have visited before, and 

the last time we visited you were in front of the O&I Committee 

and we were visiting about the risk medication program, the repayments that comes to it for the reinsurance. Are you recalling that? 

Mr. SLAVITT. Was it risk adjustment or was it reinsurance? 

Mr. MULLIN. Reinsurance. 

Mr. SLAVITT. Reinsurance, OK. 

Mr. MULLIN. Right. And at that time in the opening statement 

you said this year will add approximately 500 million to the U.S. 

Treasury. From the program as collections we will exceed the target amount to reimburse high cost claims for 2015. That was a 

quote from you; is that correct? 

Mr. SLAVITT. Sounds right. 

Mr. MULLIN. Have you made any payments to date to the Treasurer on those? 

Mr. SLAVITT. I think our collection date, if I’m not mistaken— 

this is from the top of my head—is either November 15 or December 15. So we’ll make the payment after that next collection. 

81 

Mr. MULLIN. So have you made any payments out of the reinsurance program? 

Mr. SLAVITT. No. That’ll be the payment we make when we—— 

Mr. MULLIN. Now have you made any payments to anybody out 

of the reinsurance program? 

Mr. SLAVITT. Oh, to any companies? 

Mr. MULLIN. Yes. 

Mr. SLAVITT. This year? 

Mr. MULLIN. Yes. 

Mr. SLAVITT. I have to check. 

Mr. MULLIN. I believe according to the information we received 

you have made several payments to carriers. In fact this was, the 

payments were made right before the open enrollment period. Are 

you familiar with that? 

Mr. SLAVITT. You mean last year? 

Mr. MULLIN. I believe so. 

Mr. SLAVITT. Of last year, yes. 

Mr. MULLIN. Yes. So has any payments to date been made to the 

Treasurer on this reinsurance program? 

Mr. SLAVITT. As I said, the payment will be made after our next 

collection which is either November or December 15, I can’t recall 

which. 

Mr. MULLIN. OK. The reason why I ask this is because there has 

been a discussion of how much is supposed to be paid to the Treasurer and the federal law which says that the Treasurer should receive $5 billion not $500 million over the 3 years. Are you on target 

to hit the $5 billion mark? 

Mr. SLAVITT. I recall the conversation from that hearing. I believe that that’s not our understanding of the law, so—— 

Mr. MULLIN. I know. And I believe the interpretation of the law 

seems pretty clear and you guys decided to change that without notice. I am still—— 

Mr. SLAVITT. No, I’m sorry. We went through notice. We went 

through a proper formal notice and comment period. 

Mr. MULLIN. And you responded back to us. How do you interpret the law? 

Mr. SLAVITT. I think the law was not clear in cases where less 

than $12 billion—— 

Mr. MULLIN. Do you have it where you could read it? 

Mr. SLAVITT. Pardon me? 

Mr. MULLIN. Do you have it where you could read it, because it 

seemed pretty clear to us. 

Mr. SLAVITT. The law, I believe, stated that what to do in cases 

where $12 billion was collected. The law was silent on what happened if less than $12 billion collected what the prioritization was. 

Mr. MULLIN. Did you ask—— 

Mr. SLAVITT. Therefore we went through a formalized rulemaking process. 

Mr. MULLIN. Did you ask guidance from Congress on that before 

you made that—— 

Mr. SLAVITT. We asked guidance from Congress and the general 

public by making this an open rulemaking process and we received—— 

82 

Mr. MULLIN. But in a public comment period you really don’t 

have to respond back to Congress on that. Did you specifically ask 

for our guidance on that? 

Mr. SLAVITT. I believe we asked for everybody’s guidance during 

that process. 

Mr. MULLIN. If that is the case then why has there been confusion on the payments on if that $5 billion should be paid or 

shouldn’t be paid? 

Mr. SLAVITT. Because nobody in our comment period, if I’m not 

mistaken, objected to what we put forward in the proposal. 

Mr. MULLIN. How long was that comment period open? 

Mr. SLAVITT. I’ll have to check. It was a standard comment period. It wasn’t shorter than any normal period. 

Mr. MULLIN. Because we have objected to it because we had you 

in O&I and had this conversation with you about it, so there has 

been a discussion on your interpretation of where the funds should 

go to. It seems to us or, well, let me say myself. It seems to me 

that the payments made to the insurance companies is questionable without paying it to the Treasurer in the amounts that is 

being repaid to them just to hold the premiums down. 

And it is not working, because in Oklahoma the only program we 

have left on the exchange is Blue Cross Blue Shield. They went up 

42 percent already this year and I believe they are asking to go up 

another 40 to 70 percent this year. We are seeing prices skyrocket 

across the country right now when we were told that this program 

was going to cost, or bring premiums down. 

And the question I guess that I am trying to get to is your interpretation isn’t working because it is still costing us more and the 

Treasurer isn’t receiving the taxpayer dollars that we were promised in the $5 billion. And so if it is not working, then let us work 

together and try changing it or at least the tax dollars could be 

used to, in the appropriate way. I yield back. Thank you. 

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

the gentleman from New York, Mr. Tonko, 5 minutes for questions. 

Mr. TONKO. I thank you, Mr. Chair. In the 6 short years since 

its passage, the Affordable Care Act has transformed the health 

care industry and made coverage more accessible, more affordable, 

and more secure. And I would like to take this opportunity to share 

some of the encouraging benefits of the law that we have witnessed 

in my home state of New York. 

In New York, over 450,000 individuals applied for coverage in 

the marketplace during the ACA’s third open enrollment period. As 

of 2015, the ACA has provided community health centers grantees 

in New York with over $445 million in funding that offers a broader array of primary care services, extends hours of operations, hires 

more providers, and develops clinical spaces. 

The nationwide uninsured rate continues to drop as the CDC reported last week. In New York State alone, the number of uninsured dropped by over 350,000 individuals between the years 2013 

and 2014. New Yorkers, like all Americans, have seen substantial 

benefits because of this law, and it is indeed reassuring to know 

that our work has allowed for these results to impact favorably 

those in New York. 

83 

If I could continue on now with the issue of premium increases 

that I was hearing from the last individual, ever since the Republicans gained the majority in the House they have been sounding 

the alarm on the potential for skyrocketing premiums resulting 

from the reforms of the Affordable Care Act and the fact is that we 

have not seen this happen. 

In fact, the nonpartisan Congressional Budget Office, or CBO, 

made predictions about premiums around the time of the ACA’s 

passage, and so to Administrator Slavitt I ask, did CBO predict 

that average premiums for 2016 would be higher than what the insurers actually charged this year? 

Mr. SLAVITT. That’s correct. 

Mr. TONKO. And why do you think premiums are coming down? 

Why are they lower than was expected or projected? 

Mr. SLAVITT. I think that in some cases the premiums are lower 

because there’s been good competition and good innovation and I 

think that’s been a terrific and welcome part of the marketplace. 

And I think there’s other occasions where the premiums were 

priced too low because I think no one knew exactly what things 

would cost, and therefore I think as a result we’ll see more increases this year than we have in the past. 

Mr. TONKO. While those early reports have suggested that we 

may see those higher premiums in 2017, and why, can you explain 

why that might be the case? Why would they be higher? 

Mr. SLAVITT. I think there’s two principal reasons and most of 

them—and the good news, I think, is a lot of these really are centered on one-time effects. One is that by design the reinsurance 

that supported the marketplace expires January 1, 2017, so there 

will be a meaningful increase just from that alone. 

And then secondly, I think now that you have insurance companies that have a couple years’ worth of data on what things actually cost they can use that information to price appropriately. And 

I’d like to remind people that as a country this is the very first 

time we have said to people that if you are sick we will take care 

of you and we will allow you to buy insurance anyway. No one 

knew when we entered into this exactly what that would cost, but 

the great news is we’re doing it. 

And no one likes to see costs go up and I don’t think they’re 

going to continue to go up beyond this year very significantly, on 

a large part because medical trends in this country are still at historic lows, but we would do something significant. We’ve got more 

work to do. We can do better. If Medicaid expands we’ll do even 

better, and I look forward to continuing to work through this. 

Mr. TONKO. So in a sense there is like an outlier effect that impacted 2017, and would you expect 2018 to be different? 

Mr. SLAVITT. Far be it from me to predict the future, but 2018 

will probably be a more normalized year and more in line with 

where past years have been the first couple of years. 

Mr. TONKO. OK. With that—— 

Mr. GREEN. Mr. Chairman, could the gentleman yield me your 

last 10 seconds? 

Mr. TONKO. Sure, absolutely. 

Mr. GREEN. Thank you, Paul. 

84 

Our colleague from Oklahoma, I meant to try and get time there. 

Blue Cross requested 45 percent. Mr. Slavitt, has that been considered by the state of Oklahoma or by CMS? Isn’t that a request and 

it is not an actual increase? 

Mr. SLAVITT. Yes. I’m not sure exactly where that stands at this 

point. Yes. 

Mr. GREEN. OK. Although I normally agree with Mr. Markwayne 

Mullin except on the football field but when our colleges play each 

other, so I will mention it to him later. 

Mr. TONKO. OK, with that I yield back, Mr. Chair. 

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

the gentleman from New York, Mr. Collins, 5 minutes for questions. 

Mr. COLLINS. Thank you, Mr. Chairman. Before I ask Mr. Slavitt 

a couple of questions I would like to just maybe briefly for the committee highlight some of the latest, very troubling news on the Affordable Care Act as it impacts western New York, the area of Buffalo that I represent. 

So in August, a month ago, Governor Andrew Cuomo’s administration announced that the health insurance premiums for those on 

the state’s Obamacare exchange will increase—this is after review—an average of 16.6 percent next year for over two million 

people enrolled in the program, many of them in western New 

York. Now I did say average. Some of the plans have already now 

been approved with a 29 percent increase and even 89 percent for 

one plan. 

Now at the same time, the individual mandates compelling 

Americans to buy these health insurance plans with high premiums we are also continuing to see in our area big increase in 

deductibles and insurance companies facing multi-million dollar 

losses, terminating plans. So I am not sure how Mr. Slavitt could 

say he thinks this may be an outlier year. 

We are not seeing any of those trends that wouldn’t continue on 

into the future. I don’t think the President, I don’t think anyone 

at CMS ever will acknowledge what western New Yorkers are living day to day, and that is the Affordable Care Act, Obamacare, is 

fundamentally flawed. It can’t be fixed and is imposing 

unsustainable, ever-increasing costs on Americans including my 

western New York constituents. Now perhaps the next administration will have a better understanding of the health care marketplace, the plight of the middle class, and we can finally get rid of 

this unaffordable plan. 

But Mr. Slavitt, I would like to speak to you about an often overlooked aspect of the Affordable Care Act, a provision that many 

New Yorkers didn’t know existed until they were kicked off their 

plans last year, kicked off in November last year. 

So last October, 200,000 New Yorkers were informed out of the 

blue that they would be kicked off Obamacare’s CO–OP Health Republic and forced to find a new plan immediately. This CO–OP was 

propped up by more than $265 million of squandered taxpayer 

funding and lasted less than 2 years. The Health Republic of New 

York had the highest enrollment numbers in the nation so this 

wasn’t a low enrollment problem, yet they lost 35 million in 2014, 

53 million in the first half of 2015, basically the CO–OP was never 

85 

going to be able to operate properly, and despite all these warnings 

and losses and losses, CMS neglected to even place the CO–OP in 

a corrective action plan. 

There is a couple words that come to mind—negligence, incompetence. So I guess, Mr. Slavitt, my first question is they weren’t 

put into a corrective action plan, so if they are not what was the 

purpose of even having something we called corrective action 

plans? 

Mr. SLAVITT. So certainly, and I will acknowledge that it’s no secret that many of the CO–OPs across the country, not just New 

York, faced significant financial challenges. These are, you know, 

businesses that compete against much larger companies with limited capital bases and they have very little cushion for error. 

And I think in the case of New York, they, in the beginning of 

2015, if I have my timing right I thought they were in a relatively 

good financial position and saw losses mount as claims costs came 

in throughout the year, I would say even more aggressively than 

any plan we could put on paper. I had a whole team up in New 

York working with the CO–OP and working with the state. In fact, 

I think our auditors were ones that were pointing out some of the 

problems to the CO–OP. 

Mr. COLLINS. Now I mean, let me just say you can’t defend the 

indefensible. I hear you try. But, you know, Mr. Slavitt, even after 

this what CMS did was even more egregious. They forced current 

plans to take those people that were kicked off. 

They told those plans they had to accept them at the low pricing 

that Health Republic was charging, in November when many of 

them had already hit deductibles, and the current health plans 

then suffered millions upon millions of dollars of additional losses 

because CMS said you have got to take these people. I am sorry 

their deductibles are burned out. You can only charge them what 

the low rates were to begin with. 

And so what we ended up with, and I will use the words again, 

after losses and losses and them not being placed, it was negligence 

and incompetence of CMS which hurt taxpayers, hurt participants 

and hurt other health insurance companies, something I call a loselose-lose, and that to me was unacceptable. I yield back. 

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

the gentleman from California, Mr. Cardenas, 5 minutes for questions. 

Mr. CARDENAS. Thank you very much. I have a bit of a different 

narrative coming from the state of California as to what the Affordable Care Act has done for millions of Californians. I don’t have 

time to speak to the tens of millions of Americans across America 

who are in a better position with their access to health care that 

they didn’t have before, but that having been said the Affordable 

Care Act has improved millions of lives in my state. 

For example, we have been able to expand Medicaid with over 

three million Californians having gained access to Medicaid or 

CHIP since 2013. I know you are not allowed to applaud in this 

room, but I am sure you are applauding inside. As of April of this 

year, 70 percent of Californians who were previously uninsured before the Affordable Care Act now have quality, affordable health insurance because of the Affordable Care Act. 

86 

Medicare beneficiaries in California have saved more than 1.2 

billion on prescription drugs because of the Affordable Care Act. 

The expansion of preventive services with no deductible or copay 

under the Affordable Care Act allowed more than 3.6 million Californians with the Medicare to access preventive care services in 

2014 alone. 

I am pleased with the progress that has happened in California, 

but yet at the same time any time a law is passed—and with all 

due respect the Affordable Care Act is a product of the legislative 

bodies of the United States of America. And every time we have 

passed laws—I personally have been passing laws for 20 years both 

at the state, local, and here at the national level and I have never, 

ever written a law myself nor have I ever seen any one of my colleagues that I have served with in the last 20 years, Republican 

or Democrat, pass a perfect law that doesn’t need some changes 

subsequent to the initial passage. 

It is unfortunate I believe that we have a Congress of the United 

States, the majority parties that want to just tear down this law. 

It is unfortunate. What we should be doing is looking at the disparities and the things that need to be fixed. I know some of my 

colleagues on the other side of the aisle have been talking about 

some of those things, but it is one thing to just point out flaws and 

then throw up our hands and say, oh my gosh, isn’t this horrible. 

That is not our job as legislatively elected people, democratically 

elected individuals who are supposed to be responsible and make 

sure that we fix things when we see something wrong. And it is 

unfortunate that we haven’t advanced but very small, small minor 

changes to the Affordable Care Act through the legislative process. 

I do agree that there are many changes that need to be made, 

but I am appalled at the idea that we take opportunities like today 

to just say that this is wrong and it needs to be repealed. That is 

not the case. I for one in a portion of my life when I was a boy 

lived in a household where we didn’t have access to health care. 

And what that meant was that my mother would give me some aspirin, send me to bed, and literally pray that I would wake up the 

next day feeling better. And if I didn’t, what happened was my 

family with my hardworking father providing for 13 people, 11 children and him and my mother, every single day would go to work. 

But because we didn’t have health care coverage our only alternative was to show up in the emergency room when we thought 

somebody just might die. Because of the Affordable Care Act, now 

over 20 million people in this country who were in that situation 

literally overnight are no longer in that situation. And the number 

of people who are getting true access to health care is in fact growing. 

That is what the Affordable Care Act is about. One life at a time 

through a massive law, thousands of pages that yes, it does have 

flaws. But the atrocity of the Affordable Care Act is subsequent to 

that law being enacted that we as a legislature, collectively, are not 

making the necessary changes that we all can easily identify. 

It is embarrassing that in the most capable country in the world, 

in the most powerful elected bodies in the world that we effectively 

have done almost nothing to improve the health care of Americans 

since this law has been passed. I yield back. 

87 

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

the vice chair of the Health Subcommittee, the gentleman from 

Kentucky, Mr. Guthrie, 5 minutes for questions. 

Mr. GUTHRIE. Thank you, Mr. Chairman. And I want to follow 

on that. Governor Bevin is actually trying to take a program that 

he inherited that was a hundred percent federal taxpayer paid for 

now the state has got to start putting money into the program and 

trying to make it work. He is trying to make the improvements 

that people say, well, Republicans over here—it is some political 

hit. He is actually trying to put a program together that worked. 

I heard my colleague earlier talk about Kentucky and I heard 

him speak earlier back home during the break. And I went and 

met, spent hours with Kentucky’s Medicaid Task Force and tried 

to figure out exactly what they are trying to do and what they are 

trying to do is make a program work. 

Now you cited a study, we could continue to cut universities and 

education and move that money into Medicaid, hire people on the 

short term and create jobs in health care but it is not for long-term 

sustainability of our state. And so what Governor Bevin is trying 

to do is trying to treat the expanded population of able bodied, not 

traditional Medicaid of frail, elderly, disabled people that are 

chronically ill, he is trying to take able bodied and treat them more 

like traditional insurance. 

And Mr. Slavitt, is it unreasonable to treat able bodied, non-traditional Medicaid, is it unreasonable to have a Medicaid program 

set up for them in an expanded state that treats it more like traditional insurance? That is what Governor Bevin is trying to do. Is 

that unreasonable? 

Mr. SLAVITT. So I’m going to try to not get into commenting on 

the status of this waiver request given that we are just open for 

a public comment period and it would be inappropriate for me to 

do that. 

Mr. GUTHRIE. OK. I was wondering a couple of things. A couple 

of things that I have heard my colleague from Kentucky call a poison pill, he says able bodied, not traditional Medicaid spent in 

Medicaid—should pay a premium that could be up to $15 a month. 

We have heard people talk about paying 800, 900, $10,000 a year— 

at $15 a month. 

The other one is if you are able bodied that you have to have a 

community engagement requirement. Go to work for 20 hours a 

week, go to do a service project for 20 hours a week or go to school 

for 20 hours a week because there is an ideological difference as 

my friend from Kentucky said earlier. One is, 25 percent of Kentucky is on Medicaid. The other ideological difference is let’s create 

a system and a Medicaid program where people were transitioned 

off so they can improve themselves, go to school, become productive 

and move forward. 

And that is exactly what Governor Bevin is trying to do. And if 

that is unreasonable to CMS, if that is unreasonable to my colleague from Kentucky, I know it is not unreasonable to the majority of Americans that people who receive something for free should 

have—should, one, to improve themselves have an education requirement at least to move forward and that is what Governor 

Bevin is trying to do. 

88 

I want to switch to one other state real quick. In Louisiana they 

just expanded Medicaid. This started July 1st. But in Louisiana 

they also are allowing people that are currently into the exchange 

if they want to continue in the exchange they can continue in the 

exchange even if they are Medicaid eligible. 

And I have, if I could submit to the record The Advocate, which 

is a Baton Rouge newspaper, and I will quote from it. It says the 

State says that people who bought individual policies through the 

federal marketplace but now qualify for Medicaid under state expansion can keep their Obamacare plans if they prefer them over 

Medicaid. They just have to keep paying their premiums. 

Mr. Slavitt, is that correct that if you qualify for Medicaid you 

can maintain your Obamacare premium subsidized in the marketplace? 

Mr. SLAVITT. I’d have to look at the details of that. I’m not sure. 

Mr. GUTHRIE. Well, when will CMS explicitly explain the rules 

of the road and how do we know CMS isn’t inappropriately doubledipping? They could be Medicaid qualified and be receiving premiums. I don’t think within the statute allows them to do that. 

Mr. SLAVITT. Yes, let me check on that. I hadn’t seen that article. 

Mr. GUTHRIE. OK. Another one—— 

Mr. PITTS. Without objection, that article will be placed in the 

record. 

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

Mr. GUTHRIE. Thank you. So moving on to another topic, in February of this year, Secretary Burwell said CMS would check whether exchange enrollees with subsidies are enrolled in Medicaid or 

CHIP. She said I quote, notices will be—let me start this over— 

whether exchange enrollees with subsidies are also enrolled in 

Medicaid or CHIP. And she said notices will be sent in May to consumers who are enrolled in both. Has that moved forward? 

Mr. SLAVITT. Yes, it has. 

Mr. GUTHRIE. Did that go forward in May or—there is a New 

York Times article has talked about it happening in August. 

Mr. SLAVITT. I’m not sure of the date. 

Mr. GUTHRIE. You don’t have any consumers that have been 

disenrolled in Medicaid or exchange coverage as a result of this? 

Mr. SLAVITT. I don’t know how many, but I’d be happy to get 

back to you at your office. 

Mr. GUTHRIE. OK, thank you. Any savings a taxpayer would appreciate. 

Mr. SLAVITT. Yes. 

Mr. GUTHRIE. Thank you very much and I yield back. 

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

the gentleman from New York, Mr. Engel, 5 minutes for questions. 

Mr. ENGEL. Thank you. Thank you, Mr. Chairman. Thank you, 

Mr. Green. Thank you for holding today’s hearings. 

Let me say this in terms of an overview. You know, any major 

bill or major undertaking that has been passed by Congress needs 

to be tweaked once we see how effective it is, what we see, when 

we see what the problems are. It is true with Medicaid and Medicare, it is true with any big bill, and that is true with the Affordable Care Act. 

89 

The way I look at it, the problem is our friends in the majority 

don’t want to fix it. They want to break it so it will go away. There 

are some problems with it, there is no doubt about it. But if we 

didn’t vote to repeal it 63 times and voted to improve it 63 times 

I think we would have a much better law. 

And having been on this committee when we were first drafting 

this law, I know that there are many different, you know, opinions 

and there are many things that I and others thought should have 

been put into the bill that were not put into the bill because we 

took the Senate-based bill and we thought we would be able to negotiate it, and then through circumstances we couldn’t do it. 

So I would just say that I think, they say if it ain’t broke, don’t 

fix it. Well, it is a little bit broken and it can be fixed and we 

should fix it instead of trying to kill it. So to echo Mr. Pallone, I 

am mystified by Republican attempts to paint a rosy picture of the 

insurance market prior to the passage of the Affordable Care Act. 

Let’s go back and let’s remember what it was like denying insurance to people with preexisting conditions, forcing certain populations to pay outrageous rates, applying lifetime limits to care. Before the ACA this was standard operating procedure in the individual insurance marketplace and it was incredibly harmful to our 

families, friends and constituents. And again not to mention some 

popular things like keeping your child on having insurance on your 

policy until he or she is 26 years old. 

So we have come a long way. An estimated 20 million Americans 

have gained health insurance through the ACA. My state of New 

York, there are some problems but basically it is going very, very 

well and we can rest easier knowing that a sudden illness won’t 

wreak havoc on our finances. And 129 million Americans with preexisting conditions like asthma or diabetes can no longer be turned 

away or charged more on account of their health status. More than 

39 million seniors on Medicare have received free preventive services without copays thanks to the Affordable Care Act’s preventive 

services benefit. 

And like any major legislation, as I said, it is not perfect but we 

have made a world of difference for millions of Americans who were 

once denied coverage or who could not afford it. So, you know, I 

just think that we should do right by the American people and stop 

trying to turn this into a partisan issue. There are a lot of good 

ideas on both sides of the aisle. You know, when I go back to my 

district I hear people telling me, can’t you guys get along? Can’t 

you guys work together? The American people want to see us work 

together, not lurch from one thing to another. 

So let me ask Mr. Slavitt—thank you for being here today. I 

think as I mentioned before New York provides a good example of 

what is possible when the federal government has a willing and enthusiastic partner in ACA implementation. Every county in New 

York has seen its uninsured rate decline, and on average individual 

premium rates for qualified health plans are almost 50 percent 

lower than they were before ACA implementation. 

So would you talk about what your experience has been in states 

that have obstructed efforts to implement the ACA versus your experience in states that have been good partners like New York? 

90 

Mr. SLAVITT. Yes. So I think there’s a fairly well documented difference in the uninsured rate now and Congresswoman DeGette, I 

think, referred to this, where states that have expanded Medicaid 

have lower rates of uninsured and number of benefits than the 

other states. 

I might also just comment, Congressman Engel, on your earlier 

comment about working together, you know, my understanding of 

the history of Medicare very much falls in line with what you said, 

which is that there were a number of efforts that were required 

after Medicare Advantage passed to find the things that weren’t 

working as well as they should and to amend them. 

And as a result I think we have one of the most popular, longstanding bedrock programs today in our country in Medicare. And 

so I think we have the same opportunity without a doubt here to 

not just do what we’ve done but continue to do better. And we look 

forward to working with the Congress on this. 

Mr. ENGEL. If I might, thank you. You noted during your testimony that CMS, and I quote you, has learned more about what 

kinds of outreach are most effective as you seek to reach out to the 

remaining Americans who are uninsured and eligible to enroll in 

marketplace coverage. So I am pleased to hear that CMS is drawing upon lessons learned to reach Americans who remain uninsured. 

Can you talk about why targeted outreach is so important and 

how might we expect these efforts to affect the risk pool of enrollees? 

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

Mr. ENGEL. OK. I will take it in writing. 

Mr. PITTS. Please respond in writing. 

Mr. SLAVITT. I’ll be happy to do that. 

Mr. ENGEL. Thank you, Mr. Chairman. 

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

the gentlelady from North Carolina, Mrs. Ellmers, 5 minutes for 

questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman. I thank the panel for 

being here today. 

Mr. Slavitt, I would like to go back to some of the issues with 

premium increases that are projected for 2017. There has been 

some discussion here today about the projected cost increases for 

2017 when it comes to the premiums, and I would just like to shed 

some clarity on it. And I know that you feel as strongly as we in 

Congress do about transparency and making sure that information 

to consumers is readily available. 

In North Carolina, one of the top insurers has projected that 

there may need to be about a little less than 20 percent increase 

in their premiums, and I have heard from some of my colleagues 

here substantially larger increases in premiums. And I really do 

believe that this is something that even though we in Congress understand it because we have the ability to go to the, you know, to 

get that information and our staff are able to do that, the average 

person, the average American really doesn’t. 

So I would like to understand what that process is. For instance, 

in the discussion about the Oklahoma increases you had basically 

said that you weren’t sure that that had been determined yet. At 

91 

what point will Oklahoma’s increases be determined and how will 

the rest of America know each state’s premium increases? 

Mr. SLAVITT. Yes, thank you, Congresswoman. So right now, you 

know, and each state is on a slightly different schedule, states are 

going through a rate review process and each state does it a little 

bit differently which is why it’s hard to generalize. And they’re in 

the process of reviewing the rates and then they’ll finalize and approve them. 

Most of the states, I can’t think of one that doesn’t, but most of 

the states make that information public immediately within their 

states as that happens and then they get reported in a number of 

studies. So I think they’ve been quite visible, but I can get back 

to you if you have any specific questions about states. 

Mrs. ELLMERS. Well, I am concerned and I am wondering if CMS, 

if you actually at some point post this information, you know, so 

that it is readily available. And as far as a date, I know that you 

said that the process is being played out right now. Correct me if 

I am wrong, you said November 1st is the beginning of the enrollment period for the Affordable Care Act, so will these numbers be 

known by November 1st? 

Mr. SLAVITT. Yes. Consumers will have access to this, the information beforehand. What we typically do is we open the Web site 

up early so that even before November 1st consumers can get a 

sense of what things cost and as a result the general public also 

has access to that information. 

Mrs. ELLMERS. OK. So just for clarification purposes, any American who is ready to sign up or start looking at insurance for next 

year they can know that CMS is going to have that information by 

November 1st. 

Mr. SLAVITT. Yes. That’s what we’ve done historically, yes. 

Mrs. ELLMERS. In the past, OK. And I just, you know, for the 

purposes of making sure this information is readily available, I 

have dropped a bill, 5960, which is basically the Consumer 

Healthcare Insurance Transparency Act, to make sure that we are 

making that message known to CMS that we would love for that 

information to be out there for consumers by November 1st. And 

I would like to see that happen and I hope that we will be able to 

do that again for those same purposes that you believe in which is 

consumer transparency. 

In the remaining time that I have I would like to ask, for the 

insurance companies that have come forward who have, I mean, 

you know, three major insurance companies have said that they 

are backing out of the Affordable Care plan or limiting the number, 

the most recent being Humana, and others who have discussed the 

possibility of this, what do you say to that? I mean, if this is working within a manner where only minor tweaks need to be made 

which, you know, my colleagues, Democrat colleagues continue to 

say that we just need to make it better, this really doesn’t seem 

like it is getting better. So what do you say to that? 

Mr. SLAVITT. Yes. Well, I think one thing we all have to recognize is that it’s not only change for us, it’s not only change for consumers, it’s change for these insurance companies as well. The 

business model is different in the way that they historically operVerDate Nov 24 2008 15:23 May 10, 2017 Jkt 037690 PO 00000 Frm 00097 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-168 CHRIS
92 

ated where they would essentially be able to assess people’s health 

before they would write policies has gone away. 

And so, you know, insurance companies are adjusting and I think 

they’re all—it’s hard to generalize, all adjusting differently. Many, 

many companies are doing that well and doing it successfully. 

Many, as it’s been public as you pointed out Congresswoman, have 

retrenched. Even those that have retrenched a little bit are still 

committing hundreds of millions of dollars of capital to do so, but 

they’re doing it at different paces. And I think that’s just an acknowledgment of the kind of transformation that I think everyone 

has to go through. 

Mrs. ELLMERS. Thank you so much, and I yield back. 

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

the gentlelady from Indiana, Mrs. Brooks, 5 minutes for questions. 

Mrs. BROOKS. Thank you, Mr. Chairman. Administrator Slavitt, 

when you came before the Oversight Committee on December 8, 

2015, you came to testify about the sustainability of the state-based 

exchanges. And at that hearing you testify, and I quote, over 200 

million of the original grant awards have already been returned to 

the federal government and we are in the process of collecting and 

returning more, end of quote. 

And in fact, there was significant media attention that went out 

that day indicating that CMS had recouped, recouped over 200 million from failed state exchanges. The committee then issued a report in May, and following the release of that report you responded 

to the committee stating that in fact the CMS had recouped $1.6 

million from the 17 state-based exchanges, not the 200 million initially stated during the hearing. And you clarified that it was simply an estimate of funds that CMS had de-obligated from states 

that didn’t establish the exchanges. 

But could you please explain how CMS arrived at that estimate 

initially when you came to testify in December, because it is a pretty significant discrepancy. 

Mr. SLAVITT. So I believe that the transcript shows that I was 

asked a question about 5 billion-plus of funds that were sent out 

total, and at that time I estimated that of those 5 point, I think 

it was 5 billion, 200 million or so was being covered. In fact that 

number is now over 300 million. 

Since that time I’ve got a letter from the subcommittee chair who 

said that wasn’t, in fact, the question he thought he was asking. 

He thought he was asking something different. So we clarified that 

he was in fact asking about something different. And I certainly 

will take responsibility for making sure that I’m clear, because 

when I come before these committees whether the news is good or 

bad my job is to tell it straight. And if I don’t do that then I need 

to do better, and I will. 

But, so there was a miscommunication. I will say that as for actual numbers, you know, we just, I believe, received a check for 

about $14.2 million on funds recovered from a state that did have 

trouble, so it’s actually, it’s more updated than the 1.2 million and 

so that continues ongoing. And we do keep the committee updated. 

I’m happy to continue to do that. 

Mrs. BROOKS. And so the discrepancy was with respect to characterization of recouping versus de-obligating; is that correct? 

93 

Mr. SLAVITT. I think that’s right. 

Mrs. BROOKS. And so the recoupment was actually 1.6 million at 

that time? 

Mr. SLAVITT. It’s greater than that today. 

Mrs. BROOKS. And can you tell me today, and thank you. That 

was my next question. Can you please talk to me about an update 

on the amount recouped from the 17 state-based exchanges today? 

Mr. SLAVITT. I don’t have the exact figures with me, but I know 

that it’s at least higher by about $14 million because we just received a check back from one of the states for over $14 million. So, 

but I can get you a complete accounting. 

Mrs. BROOKS. And which state is that? 

Mr. SLAVITT. The state of Maryland. 

Mrs. BROOKS. So State of Maryland just wrote a check back for 

14 million in addition to the 1.6 million, and at the time the 1.6 

million, do you have any idea how many states that had come from, 

the 1.6 million? 

Mr. SLAVITT. I’m not sure exactly. It’s three or four, something 

like that. 

Mrs. BROOKS. OK. And so the other, then, you know, 12 or so 

states, can you talk with us about what is being done with respect 

to the recoupment of the funds? 

Mr. SLAVITT. Recoupment of which funds? 

Mrs. BROOKS. The recoupment that we initially began talking 

about. Are you expecting to receive additional funds from other 

states? 

Mr. SLAVITT. So we expect to recover funds that are improperly 

spent and that we can document are improperly spent. We, with 

the help of the OIG who’s been very helpful in providing analytics, 

you know, go out and look for and assess when funds have been 

improperly spent. But, and those funds we do recover when, and 

we also, I should say, review many funds before they are spent. 

And so we don’t need to go through a collection process if we required an approval process which we put in place as well. 

Mrs. BROOKS. And the 14 million that Maryland just returned, 

was that for improperly spent funds? 

Mr. SLAVITT. So that was for their technology vendor, was essentially the state got into a dispute with them for overcharging them 

or wasting technology spending. They settled the lawsuit and the 

14 million was the down payment on the federal share of that funding. I think the total that will come in from Maryland is 32 million 

based on that specific thing. 

Mrs. BROOKS. Thank you, my time is up. However, I would be 

interested in the committee receiving a report on the status of 

where the recoupment of funds is today from all of the states. 

Mr. SLAVITT. We will update you. 

Mrs. BROOKS. Thank you. I yield back. 

Mr. PITTS. The chair thanks the gentlelady. I would like to clarify that Mr. Slavitt made the $200 million estimate in his opening 

statement not in response to a question. 

That concludes the first round of questions of members present. 

We will go to one follow-up per side and I will start. I recognize 

myself 5 minutes for that purpose. 

94 

To follow up on Mr. Griffith’s questions about risk corridors, Mr. 

Slavitt, you said that there is an obligation to make insurers whole. 

My question is how does CMS plan to pay for the risk corridor obligation to make insurers whole under that program because there 

are no appropriated funds to do so? 

Mr. SLAVITT. I can’t speak to that directly today, but I mean, this 

is as you know as I’ve said earlier the subject of a lawsuit, so I 

think we’ll let that settle out. 

Mr. PITTS. Well, this is not a question for DOJ because not all 

insurers are in the litigation. And so the question is how do you 

plan to pay for the obligation when there are not appropriated 

funds to do so? 

Mr. SLAVITT. Well, I’ll get back to you. I’ll consult with OMB and 

get back to you. 

Mr. PITTS. Thank you. Another question, Mr. Slavitt, the committee’s investigation into the CO–OP failures examined the negative 

impact of the 17 CO–OP closures and what they had on individuals 

enrolled in health insurance plans and the closures created uncertainty as individuals were forced to find new health insurance coverage. 

In some cases with mid-term shutdowns, individuals had to ask 

fast in order to avoid gaps in coverage. Based on this finding, one 

of the recommendations from the committee’s report released today 

is that the individuals be exempt from the individual mandate penalty if their coverage under a plan offered by a CO–OP is terminated due to the failure of a CO–OP. 

We believe this recommendation is common sense as we should 

not be punishing individuals who make a good faith effort to comply with the individual mandate as a result of their plan no longer 

being offered. Does CMS agree with this recommendation? 

Mr. SLAVITT. Well, we didn’t receive that report until late in the 

evening last night so I haven’t had time to study it in detail, but 

we will. 

Mr. PITTS. Will you please respond to that question once you 

view the report? 

Mr. SLAVITT. Will do. 

Mr. PITTS. Thank you. That is the only follow-up questions I had. 

The chair will recognize the ranking member, Mr. Green, for his 

follow-up. 

Mr. GREEN. Thank you, Mr. Chairman, and I have two issues. 

One, my colleague from Denver, Colorado, earlier mentioned the 

GAO study. If you would listen to all the questions on the Republican side you would think the people are up in arms about how 

bad the Affordable Care Act. But the GAO study that she mentioned was that there were studies in Colorado, Indiana, Montana, 

North Carolina and Vermont, and consumers, sister shareholders 

concluded that most exchange customers are satisfied with their 

coverage despite longstanding issues of out-of-pocket expenses, 

health literacy and access. 

Mr. Bagdoyan, is that something the GAO was going to comment 

on, that study that was released on Monday? 

Mr. BAGDOYAN. In what sense, Mr. Green? 

Mr. GREEN. Oh, just one, why you only did five states, because 

a lot of us would like to see the consumer feelings on the Affordable 

95 

Care Act. I mean, you know, of course we trust the GAO for your 

work. 

Mr. BAGDOYAN. Unfortunately I was not responsible for running 

that engagement that resulted in that report, but we’ll be happy 

to get back to you in writing with an answer as to why those—— 

Mr. GREEN. OK, I appreciate it. 

Mr. BAGDOYAN. Sure. 

Mr. GREEN. We wasted countless hours in this committee, and 

my Republican colleagues criticize provision after provision of the 

Affordable Care Act and root for its failure. We should instead be 

using this time to build the law’s successes by improving quality 

affordable care now available to our constituents. 

Administrator Slavitt, I applaud CMS’s diligent work to implement the law and I know your agency has taken steps where possible to make administrative fixes, but some of the fixes require 

legislative action. Unfortunately, my Republican colleagues are 

only interested in undermining, weakening or repealing the law. 

Mr. Slavitt, what steps has the Administration taken to help ensure the long-term success of the ACA, but more importantly, I 

would like to ask if you know what steps should be taken by statute for Congress to do to help make the Affordable Care Act moving forward and to be more successful? 

And again I don’t think in the 2 or 3 minutes or so you have, 

but I would be glad if you could get back with us—— 

Mr. SLAVITT. OK. 

Mr. GREEN [continuing]. And CMS could, one, list what CMS has 

done, but then also say these are issues that you have that Congress needs to act on them so we could fix it so we could cover more 

people. 

Mr. SLAVITT. We’ll be glad to do that. Thank you. 

Mr. GREEN. OK. Mr. Chairman, I thank you and I yield back my 

time. 

Mr. PITTS. The chair thanks the gentleman. That concludes the 

questions of the members present. We will have some follow-up 

questions in writing and other members who maybe were not able 

to attend may have questions in writing. We will provide those to 

you. We ask that you please respond promptly. 

And members should, they have 10 business days to submit 

questions for the record, so members should submit their questions 

by the close of business on Wednesday, September 28. Another very 

informative and productive hearing, thank you very much for your 

expertise and without objection, the hearing stands adjourned. 

[Whereupon, at 12:52 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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September 9, 2016 

Long's Short Report-Affordable Care Act's effects on education 

By: U.S. Rep Billy Long 

It's been six years since the Patient Protection and Affordable Care Act passed, which is also 

known as the Affordable Care Act or Obamacare. On Sept. 8 Gallup announced the results of a 

poll conducted Aug. 30-31 in which 51% of Americans disapprove of Obamacare while only 44% 

approve. During my time as a Congressman I have worked hard to dismantle this law, which has 

not lived up to its hyperbole and promises. 

In August I visited and talked with many community leaders in the ?'h District, but one stop in 

particular reminded me once again of the amount of stress !his law places on schools and small 

businesses. 

I had the opportunity to speak with members of the Nixa Public School's Board of Education and 

district administrators. 

After speaking with them it confirmed again why I have been fighting to repeal this law that hurts 

schools and small businesses. 

Two of their most pressing problems with the law were the 30-hour work week and the 26 week 

break for retired teachers. 

The 30-hour work week, which is known as the employer mandate, requires all businesses or 

organizations with 50 or more employees to provide health insurance to their employees who 

work more than 30 hours a week. Nixa currently has 921 full-time staff. 

The 26 week break is required for educational organizations that are unable to provide health 

insurance to faculty that recently retired. If ignored, that retired teacher would be seen as a 

"continuing employee," which would require them to offer health insurance. 

Brenda Rantz, the Executive Director of Finance for the school district and Board of Education 

Treasurer, pointed out that this is a huge problem as children need consistency in working with 

teachers and the 30-hour work week prevents that. 

Nixa already spends $3.4 million a year on health care for their staff. Having to provide additional 

health care for substitute teachers who work more than 30 hours a week would add an additional 
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22696.037

financial burden to the district. 

In one year, Nixa can have anywhere between 30 to 40 long-term substitute teachers. With 921 

employees already in the district, adding substitute teachers, both long-term and short-term, 

could increase the number of employees up to 1 ,200. 

Not only does the lack of consistency with substitute teachers play into their predicament, but 

finding high quality substitute teachers is more challenging. The 26 week break for retired 

teachers prevents those same teachers from coming back in less than six months. Those are the 

same teachers who know the students, know the faculty and know how the school operates. 

This isn't the first time I have heard a story like this. I have heard many across our district. These 

types of stories give me even more motivation to continue to push back against this law and that 

hurts not only individuals who need health care, but businesses and organizations that provide 

health care for their employees. 
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22696.038

Uncertainty surrounds 

whether newly Medicaideligible in Louisiana can 

keep their Obamacare 

plans if prefer them 

TED GRIGGS I THE ADVOCATE 

JUL 3, 2016- 12:15 AM 

Advocate staff photo hy BILL FEIG --Gov. John Bel Edwards, third ftom right, and Dr. Rebekah 

Gee, DHH Secretary, second from right, discusses Medicaid expansion at an event. From left, 

Rodrick Perkins, BR council member Donna Collins-Lewis, Loretta Robillard, Originae Brown, 

Edwards, Gee and Linda Simms. The event is the first in a series ftom Gov. Edwards and Dr. Gee in 

the state on this topic. Gov. Edwards and Dr. Gee met with new enrollees of the Medicaid expansion 

program and made an announcement regarding the June I enrollment start date, including providing 

new information for the public. 
99 


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This refrain may sound familiar: If you qualify for Medicaid but you like your 

Obamacare plan you can keep it .... Unless you can't. 

That's the confusing and mixed message residents are getting from the state and 

insurance companies now that Louisiana has become the 31st state to expand Medicaid 

under the Affordable Care Act. About 375,000 people - mostly the working poor - are 

expected to get free health insurance coverage through the expanded program, which is 

mostly subsidized by the federal government. 

Tens of thousands of those Louisiana residents -the total's not known - already have 

health insurance policies through what is called the federal marketplace, an Obamacare 

program that pays most of their insurance premiums. 

The state says people who bought individual policies through the federal marketplace 

but now qualify for Medicaid under the state expansion can keep their Obamacare plans 

if they prefer them over Medicaid. They just have to keep paying their share of the 

premiums. 

"There's no requirement that they move," said Ruth Kennedy, Louisiana Medicaid 

Expansion project director. 

But Blue Cross and Blue Shield of Louisiana, the state's largest health insurer and 

carrier for the bulk of Obamacare policies, says that's not allowed under federal 

regulations. 

Once Obamacare plan members become eligible for Medicaid they are no longer eligible 

for the federal subsidies that help them pay for the federal marketplace coverage, said 

Blue Cross spokesman John Maginnis. 

The date of Medicaid eligibility is based on when the person is notified. The notification 

may come from the state or federal government or when the person checks his or her 

enrollment status online at Healthcare.gov. 

Blue Cross expects 20,000 to 30,000 of its members people who bought individual 

Obamacare coverage through Healthcare.gov and received subsidies - to become 

Medicaid-eligible with the program's expansion, Maginnis said. Those people will need 

to enroll in Medicaid and cancel their marketplace plans by calling Healthcare.gov. 

"If they do not take steps to end their Blue Cross coverage, the government could charge 

them a tax penalty and bill them for any subsidy they get after becoming eligible for 

Medicaid," Maginnis said. 

Other health industry experts have a different interpretation. 
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22696.040

Brian Burton, program director for the Southwest Louisiana Area Health Education 

Center, said because the state expanded Medicaid in the middle of the year, Obamacare 

enrollees have the option to keep their private insurance through 2016. 

But in 2017, people who earn less than 138 percent of the federal poverty level will have 

to move to Medicaid. 

On Tuesday, Kennedy said Blue Cross and Burton were both incorrect. There's a lot of 

bad information out there, she said, including the mistaken belief that people must 

enroll in Medicaid if eligible. She based her opinions on discussions with federal Centers 

for Medicare & Medicaid Services officials. 

On Friday, Kennedy was less certain about Burton's statement being incorrect. Kennedy 

said she hadn't been able to nail down the federal agency on what would be required of 

the newly Medicaid eligible after Dec. 1. 

The Centers for Medicare & Medicaid Services declined comment on Blue Cross's 

assertions. 

Ho~ever, the agency did issue a statement saying CMS and state officials will send 

notifications to individuals who may now have additional coverage options to assist 

them with exploring those potential choices. 

Kennedy said the only thing that will be a problem this year for Obamacare members 

who are also eligible for Medicaid is if they enroll in both at the same time. 

That's happened in other states that expanded Medicaid, said Elizabeth Hagan, a senior 

policy analyst at Families USA, a health care consumer advocate. 

"You do have to pay back those premium tax credits because you're only eligible for one 

or the other," Hagan said. 

And that can be costly. 

Close to 93 percent of the 184,400 Louisiana residents who got health insurance 

through Obamacare receive help to offset the costs, according to the U.S. Department of 

Health and Human Services. This year, the average monthly premium paid by Louisiana 

residents who get subsidies is $86. The average subsidy is $362 per month. 

This means the vast majority of the premium is covered by the federal government, or 

taxpayers. It also means a new Medicaid enrollee who forgets to cancel his or her 

Obamacare plan could find himself on the hook for hundreds of dollars for each month 

the policy remains in place. 
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22696.041

Hagan said the Centers for Medicare & Medicaid Services will try to prevent dual 

enrollment through a program known as periodic data matching. 

In this process, information from the federal marketplace is checked against that of 

Medicaid. Consumers who enrolled in both programs receive a notice that they need to 

immediately cancel their Obamacare coverage. 

In the past, dual enrollees would continue to receive premium tax credits unless they 

cancelled their policies, Hagan said. But later this summer, the Centers for Medicare & 

Medicaid Services will actually shut off those credits, protecting consumers from 

learning at the end of the year that they have to pay back the subsidies. 

The question, Hagan said, is this: Does Louisiana's expanded Medicaid program have 

the capacity to do the periodic data match? Louisiana has done so in the past, but it's 

possible the program won't be able to check the entirety of the newly expanded 

Medicaid population. 

It's unclear how many Louisiana residents now covered by Obamacare will move to 

Medicaid. 

Vantage Health Plan and Humana, the other insurers that offer coverage on the federal 

marketplace, did not have estimates. Vantage spokesman Billy Justice said several 

thousand could possibly be touched by the expansion. 

Humana spokesman Mitch Lubitz said customers who ask about their Medicaid 

eligibility will be referred to the Centers for Medicare & Medicaid Services. 

Justice said Vantage was instructed to let that agency and the state Department of 

Health handle the notifications. 

People may be able to keep their Obamacare plans through the end of the year, Justice 

said. As far as he understands, the newly Medicaid-eligible have to switch when their 

Obamacare plans come up for renewal. If they don't, they could be penalized on their tax 

returns or be sent a bill by the IRS, but that could change. 

Kennedy said some people will switch and some won't. 

Moving to Medicaid offers some advantages. For one thing it's free to members, she 

said. Adults' maximum out-of-pocket costs are so cents to $3 per prescription, and even 

that's not enforceable. 

If a person doesn't have the ability to pay, he doesn't have to, Kennedy said. 
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22696.042

Burton said his group, which helps people navigate the Obamacare enrollment process, 

is seeing a pretty even split on people keeping their private coverage versus moving to 

Medicaid. 

"There are consumers who are saying, 'I'm still having a hard time meeting the co-pays, 

so I'd like to drop the marketplace insurance and sign up for Medicaid.' But then you've 

got half saying, 'No, I'm going to ride this wave as long as I can. Because I've got a Blue 

Cross or Vantage or UnitedHealth plan, the network (of available doctors and medical 

facilities) is so much wider than with one ofthe Medicaid providers."' 
103 


22696.043

FRED UPTON, MICHIGAN 

CHAIRMAN 

Mr. Andy Slavitt Acting Administrator 

ONE HUNDRED FOURTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

€ongrtS'S' of tbt Wntttb ~tattS' 

~om~e of l\cpw.itntatibe!) 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 

October II, 2016 

Centers for Medicare and Medicaid 7500 Security Boulevard Baltimore, MD 21244 

Dear Mr. Slavitt: 

Thank you for appearing before the Subcommittee on Health and the Subcommittee on Oversight and Investigations 

on Wednesday, September 14, 2016, to testifY at the hearing entitled "The Affordable Care Act on Shaky Groond: Outlook and 

Oversight." 

Pursuant to the Rules of the Committee on Energy and Commerce, the bearing record remains open for ten business 

days to permit Members to submit additional questions for the record, which are attached. The fonnat of your responses to 

these questions should be as follows: (1) the name of the Member whose question you are addressing, (2) the complete text of 

the question you are addressing in bold, and (3) your answer to that question in plain text. 

Also attached are Member requests made during the hearing. The format of your responses to these requests should follow the same format as your responses to the additional questions for the record, 

To facilitate the printing of the hearing record, please respond to these questions and requests with a transmittal letter 

by the close of business on Tuesday, October 26,2016. Your responses should be mailed to Elena Brennan, Legislative Clerk, 

Committee on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 20515 and e-mailed in Word format to Elena.Brennan@mail.house.gov. 

Thank you again for your time and effort in preparing and delivering testimony before the Subcommittees. 

Sincerely, 

Tim Murphy 

Chainnan 

Subcommittee on Oversight and 

lnvestigations 

cc: The Honorable Gene Green, Ranking Member, Subcommittee on Health 

The Honorable Diana DeGette, Ranking Member, Subcommittee on Oversight and Investigations 

Attachments 
104 


22696.044

Attachment !-Additional Questions for the Record 

The Honordble Joe Barton 

1. Mr. Slavitt, late last year I was contacted by Mr. Ron Knott of Desoto, Texas, who told me that Blue 

Cross Blue Shield would no longer offer PPO plans on the Texas exchange. I was alanned by this news 

and looked further into to it, only to realize that insurance companies across the nation were doing the 

same thing. Now, here we are in 2016 and I see premium requests for as high as 62%. What will the 

health insurance market look like in five years or even ten years? What choices will consumers be left 

with in these state exchanges? 

2. Mr. Slavitt, in your testimony, you say that premiums remain well below what CBO initially predicted, 

citing a 2010 CBO report. But in this same year, CBO said that premiums for the individual would 

increase 27 to 30 percent as a result ofObamacare. Right now, for the 17 states that have approved their 

rates, the average increase is 25.8 percent from 2015 alone. Do you think that a roughly 27 percent 

increase- before we've seen some of the traditionally more expensive states- is affordable? 

The Honorable Michal C. Burgess, M.D. 

l. Do you believe it is appropriate for state exchanges to transition to HealthCare.gov after spending 

hundreds of millions of taxpayer dollars? Should there be consequences? Should the states be required 

to raise state revenue or user fees to keep their exchanges afloat, instead of spending more federal 

dollars? 

a. Do you expect additional states to transition to HealthCare.gov? 

b. Have any state exchanges approached you about transitioning to HealthCare.gov? Which ones? 

2. When· a state exchang<:--'such as Hawaii, Nevada, New Mexico, or Oregon-decides to shut down its 

exchange, what happens to any remaining unspent establishment grant dollars? 

a. Does CMS try to recoup any of the unspent establishment grant dollars? Why or why not? 

b. Does CMS require the state exchange to retum any of the establishment grant dollars-spent or 

unspent? Why or why not? 

3. Does the federal government incur any additional costs when a state exchange migrates to 

Healtheare.gov? In other words, does the tnmsition cost the federal govcmment any additional money? 

a. If so, how much? What were the specific costs? 

b. Please provide a breakdown of the costs and how much was money that was already awarded to 

the state-exchange via establishment grants and how much was additional funding. 
105 


22696.045

The Honorable Marsha Blackburn 

Mr. Slavitt, the Health Subcommittee held a discussion on May 11,2016 about solutions that are fair 

and move patients away from today's rigged health care system. We talked about ways to achieve stronger 

protections for pre-existing conditior:s, lower costs, increase choices, and market stability without mandates. 

During this hearing, I spent the bulk of my time reviewing Special Enrollment Periods, or SEPs. Many 

observers and members of Congress believe that these are being abused, which is leading to an imbalance in the 

risk pools. I'd also like to add that I have a bill, H.R. 5589, the Plan Verification and Fairness Act that gets at 

this issue, and I would request that this administration support this measure. 

1. I realize the administration has moved to improve the verification process. But the current confirmation 

process is post-enrollment Do you believe that leniency for SEP verification has led to marketplace 

instability? 

2. How many people have had their coverage retroactively ended because they did not provide adequate 

documentation? 

3. If someone provides inadequate or false information after their plan has taken effect and they've already 

received a tax credit, what happens to that individual and the tax credit? 

The Honorable Gus Bilirakis 

Last December HHS' OIG issued a report titled, "CMS Could Not Effectively Ensure that Advance 

Premium Tax Credit Payments Made Under the Affordable Care Act Were Only for Enrollees Who Paid Their 

Premiums." In the report, OIG stated that CMS was paying advance premium tax credits based on the 

attestation of the insurance companies without verifying on an individual level if monthly premiums were being 

paid. The 010 recommended that CMS institute an automated policy-based payment process to verify premium 

payments on a monthly or real-time basis. 

I. When did CMS institute tlm automated policy-based payment process with insurers for the federal 

marketplace? 

2. Are the state-based exchanges using an automated policy-based payment process? 

a. If not, what are they using to verify if premiums are paid? 

b. Does CMS perform any verification on submitted state-exchange data? 

c. Is there any penalty for not performing this verification by state-exchanges? 

3. Does CMS have any plans of nnming the policy payment process against prior years to find individuals 

who may have improperly claimed cost sharing reductions or premium tax credits when they were not 

current on their payments? 

a. If no, why not? 

Does CMS have a legal obligation to recoup Advance Premium Tax Credits that were improperly 

claimed or paid by CMS? 

2 
106 


22696.046

b. Please describe the duties and responsibilities of CMS for the Advance Premium Tax Credit 

under the Memorandum of Understanding signed with the Treasury/IRS. 

4. Does CMS have a legal obligation to recoup Cost Sharing Reductions that were improperly claimed or 

paid by CMS? 

5. In Secretary Burwell's testimony to E&C in February 2016, on the question of the automated payment 

process, the Secretary stated that the process was in place and, "we have seen the results in that the 

number of those enrolled in the marketplace actually is lower because we had more people come out." 

When CMS instituted this policy~ based payment process for the federal marketplace, by how much did 

you find enrollment was reduced? 

The OIG report recommended that CMS provide the IRS with Advance Premium Tax Credit payment data 

when payments are made throughout the year in order to allow the IRS to verifY the data reported on each 

individual's tax forms. 

6. Is CMS providing Advance Premium Tax Credit payment data to IRS for federal exchange enrollees? 

a. Is CMS providing Advance Premium Tax Credit payment data to IRS for state exchange 

enrollees? 

i. If not, who is responsible for providing this information to IRS? 

ii. Is there any penalty for not providing this information? 

The Honorable Billy Long 

I. Mr. Slavitt, I am the sponsor for H.R. 815, the Access to Professional Health Insurance Advisors Act of 

2015, a bill that would carve out agent commissions from the Medical Loss Ratio. Every Energy and 

Commerce Republican and several Committee Democrats have cosponsored the bill. Much of the 

success for enrollment in the exchanges has been due to agent involvement. Yet agent commissions are 

continuing to be cut due to the Medical Loss Ratio. In your testimony, you state that you are providing 

the carriers with some relief from the Medical Loss Ratio. I have no problem with that, but why not the 

same consideration for the agents? 

The Honorable Bill Flores 

1. In your testimony you paint a picture of a very utopian health care environment. One where my 

constituents are experiencing unprecedented access to care while being inundated with consumer choice 

and lower than expected costs. Also in your testimony you lead us to believe that CMS can fix what few 

problems do exist with lessons learned from a trial and error system that your agency bas employed. Yet 

you seem to gloss over the fact that this utopian view accompanies an inunense cost to the taxpayer. 

Fraud and failed state based exchanges and CO-OPs being the tip of the iceberg. Do you think that a trial 

and error system is fair to the hardworking taxpayer in my district that is footing the bill for CMS' 

mistakes and miscalculations? 

2. In your testimony, you list a number of policy change fixes to build a stronger marketplace. The second 

action you point to is to "better reflect the risk associated with enrollees who are not enrolled for a full 

3 
107 


22696.047

12 months," Do you helievethathavingpatients participate for all12 months is best for their care as 

well as for risk balance? 

a. Is your agency actually negatively impacting patient care by allowing individuals to go three 

months without paying for their premiums before they lose coverage? 

b. Prior to the ACA, over 40 state individual markets had a roughly 30-day grace period. Why are 

you allowing exchange participants three times as much time before their plan is ended? 

c. You state that not having individuals enrolled for a full12 months is problematic yet in one state 

as many as 50 percent of enrollees enter the grace period at some point during the benefit year. 

Given your statement, do you find that 50 percent number troubling? 

The Honorable Chris Collins 

3. The Committee's report, "Implementing Obamacare: A Review ofCMS' Management of the Failed 

CO-OP Program,"' explains how several factors caused the CO-OPs to fail. One in particular was 

enrollment; that both low and high enrollment caused CO-OPs to become fmancially insolvent. Health 

Republic Insurance ofNew York had the highest enrollment numbers in the nation, yet, the CO-OP lost 

$35 million in 2014, and $52.7 million in the firsthalfof2015. Despite these and other warning signs, 

CMS decided not to place the CO-OP on a Corrective Action Plan. Why did CMS decide not to place 

Health Republic on a Corrective Action Plan? 

4. Page 29 of the Committee's CO-OP report discusses how CMS only placed two CO-OPs on Corrective 

Action Plans before HHS-OIG issued its July 2015 audit "Actual Enrollment and Profitability was lower 

than projections made by the Consumer Operated and Oriented Plans and might affect their ability to 

repay loans provided tmder the Affordable Care Act." Both of these Corrective Action Plans were the 

direct result of state regulators finding that the CO-OPs violated state Jaws. Corrective Action Plans for 

the remaining CO-OPs were not imposed until after HHS-OIG cited warning signs in their report. lt 

seems as if CMS simply followed the actions of other regulators, rather than conduct its own oversight 

to identify problems before the CO-OPs failed. Did CMS conduct any of its own oversight of the COOP programs? If so, did CMS conduct any of this oversight prior to HHS OIG's July 2015 audit? 

a. Did CMS issue any Corrective Action Plans that were not based on the work of other outside 

groups? 

1 implementing Obamacare: A Review ofCMS' Management of the Failed CO-OP Program. U.S. House of Representatives, Committee on Energy and Commerce, Majority Staff, 13 Sept. 2016, available at: 

Ill!u.s://energvcommerce.housc.gov/sites/republicans.eneroycommerce.house.gov!files/documents/l t4/analysisi20160913Review of 

CMS Management of the Failed CO 0!'-Program.pdl> 

4 
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22696.048

Attachment 2--Member Requests for the Record 

During the hearing, Members asked you to provide additional information/or the record, and you indicated 

that you would provide that information. For your convenience, descriptions oft he requested information are 

provided below. 

The Honorable Joseph R. Pitts 

1. Please provide the Committee with recommendations from the February 2016 GAO report that 

recommends CMS conduct a risk assessment of potential exchange fraud, application eligibility, and the 

enrollment process. 

2. Does CMS support the Committee's recommendation in the CO-OP report, entitled, "hnplementing 

Obamacare: A Review ofCMS' Management of the Failed CO-OP Program," that individuals be 

exempt from the individual mandate penalty if their coverage under a plan offered by a CO-OP was 

terminated due to the failure/closure of the CO-OP?1 Please explain. 

The Honorable Brett Guthrie 

l. Secretary Burwell said that CMS would check whether exchange enrollees with subsidies are also 

enrolled in Medicaid or CHIP. She also said that notices would be sent in May to consumers who are 

enrolled in both. Have any consumers actually been unenrolled in Medicaid or an exchange as a result of 

this? 

The Honorable David McKinley 

1. Please provide an update on the site-neutral deadline case for the hospital complex in West Virginia that 

I mentioned during the hearing. 

The Honorable Morgan Griffith 

I, Please provide the names of those at CMS who have spoken to the Justice Department about the Risk 

Corridor lawsuits. 

2. Please provide a list of insurers that are suing or have indicated that they intend to sue CMS for Risk 

Corridor payments. 

The Honorable Larrv Bucshon 

I. Please provide the Committee with an analysis of the Medicare Part B proposed rule that would force 

physicians and practices to send patients to hospitals to receive care, increasing costs for beneficiariesparticularly as it relates to increased costs due to shifting care to hospitals, 

1 /mplemenf(ng Obamacare: A Review ofCMS' Management of the Failed C()...OP Program. U.S. House of Representatives, 

Committee on Energy and Commerce, Mlljority Staff, 13 Sept, 2016, available at: 

https://energycomrnerce.house.gov/sitesJrepublicnns.enernycommerco.house.goY/files/documcntslll4/ana1ysis120l60913Reyiew- of 

CMS Management of the Failed CO OP-Program.pdf 
109 

Æ 


22696.049

The Honorable Susan Brooks 

1. At the hearing you indicated that the amount of funds recouped from the state-based exchanges is 

greater than the $1.6 million previously reported to the Committee, and is in fact at least higher by about 

$14 million. Please provide an update on the status of recouped funds from all slate-based exchanges. 

Please provide this update with breakdowns of amounts by state and date of re-payment. 

2