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OBAMACARE: WHY THE NEED FOR WAIVERS?

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF

COLUMBIA, CENSUS AND THE NATIONAL ARCHIVES

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

MARCH 15, 2011

Serial No. 112–13

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF COLUMBIA, CENSUS AND THE

NATIONAL ARCHIVES

TREY GOWDY, South Carolina, Chairman

PAUL A. GOSAR, Arizona, Vice Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

PATRICK T. MCHENRY, North Carolina

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

DANNY K. DAVIS, Illinois, Ranking Minority

Member

ELEANOR HOLMES NORTON, District of

Columbia

WM. LACY CLAY, Missouri

CHRISTOPHER S. MURPHY, Connecticut

(III)

C O N T E N T S

Page

Hearing held on March 15, 2011 ............................................................................ 1

Statement of:

Larsen, Steven, deputy administrator and director, Center for Consumer

Information and Insurance Oversight, Centers for Medicare and Medicaid Services; Edmund Haislmaier, senior research fellow, Center for

Health Policy Studies, the Heritage Foundation; Scott Wold, shareholder, Hitesman and Wolf; and Judith Feder, professor, Georgetown

University and senior fellow, Center for American Progress Action

Fund ............................................................................................................... 32

Feder, Judith ............................................................................................. 60

Haislmaier, Edmund ................................................................................. 44

Larsen, Steven ........................................................................................... 32

Wold, Scott ................................................................................................. 54

Letters, statements, etc., submitted for the record by:

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 27

Davis, Hon. Danny K., a Representative in Congress from the State

of Illinois, prepared statement of ................................................................ 11

Feder, Judith, professor, Georgetown University and senior fellow, Center

for American Progress Action Fund, prepared statement of ..................... 62

Gowdy, Hon. Trey, a Representative in Congress from the State of South

Carolina:

HHS guidance ................................................................................................... 15

Prepared statement of ...................................................................................... 4

Haislmaier, Edmund, senior research fellow, Center for Health Policy

Studies, the Heritage Foundation, prepared statement of ........................ 46

Larsen, Steven, deputy administrator and director, Center for Consumer

Information and Insurance Oversight, Centers for Medicare and Medicaid Services, prepared statement of ............................................................ 34

Wold, Scott, shareholder, Hitesman and Wolf, prepared statement of ........ 56

(1)

OBAMACARE: WHY THE NEED FOR WAIVERS?

TUESDAY, MARCH 15, 2011

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF

COLUMBIA, CENSUS, AND THE NATIONAL ARCHIVES,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 1:35 p.m., in room

2247, Rayburn House Office Building, Hon. Trey Gowdy (chairman

of the subcommittee) presiding.

Present: Representatives Gowdy, Gosar, DesJarlais, Walsh, Norton, Clay, and Davis.

Also present: Representatives Issa and Cummings.

Staff present: Ali Ahmad, deputy press secretary; Molly Boyl,

parliamentarian; Drew Colliatie, staff assistant; John Cuaderes,

deputy staff director; Christopher Hixon, deputy chief counsel,

oversight; Keven Corbin, minority staff assistant; Jill Crissman

and William Miles, minority professional staff members; Carla

Hultberg, minority chief clerk; Chris Knauer, minority senior investigator; Dave Rapallo, minority staff director; and Suzanne

Sachsman Grooms, minority chief counsel.

Mr. GOWDY. The committee will come to order.

Let me thank everyone for their patience and indulgence. I apologize for the vicissitudes of our voting schedule. We are sorry for

any inconvenience.

I will start this hearing as we do all of our oversight hearings

by reading the mission statement.

We exist to secure two fundamental principles: First, Americans

have a right to know that the money Washington takes from them

is well spent, and second, Americans deserve an efficient, effective

Government that works for them. Our duty on the Oversight and

Government Reform Committee is to protect these rights. Our solemn responsibility is to hold Government accountable to taxpayers

because taxpayers have a right to know what they get from their

Government. We will work tirelessly in partnership with citizen

watchdogs to deliver the facts to the American people and bring

genuine reform to the Federal bureaucracy. This the mission of the

Oversight and Government Reform Committee.

If the witnesses would like, they can come to the table at this

point. Thank you.

I will recognize myself for an opening and then recognize the

gentleman from Illinois.

The purpose of the Oversight Committee is not necessarily to

balance the relative merits or demerits of a law or proposed legislaVerDate 11-MAY-2000 15:25 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67370.TXT KATIE PsN: KATIE
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tion. Other committees do that. Oversight is calculated to ensure

trust and confidence in the institutions of Government, to investigate areas that demand transparency and accountability. Our

duty is to ask fair questions with an expectation of an honest and

complete answer on behalf of the people we represent. That is why

we are here today.

Many in this room, including myself, fundamentally oppose the

health care legislation passed last year. We have serious concerns

with Federal mandates on individual citizens and massive new government spending programs in such an austere fiscal environment,

but those conversations are reserved for other forums.

The current health care law was marketed to the American people as a means to provide high quality health coverage options to

every citizen in our country while ensuring that those who like

their current coverage can keep it. Over the past year, it has become abundantly clear that companies are having trouble complying with the new law. In order to escape the onerous burdens

placed on businesses by this legislation, many of these companies

have sought waivers from the Secretary for Health and Human

Services, with varying levels of success.

The necessity of these waivers arose because many companies

employ a health coverage strategy that provides some employees

with mini-med plans that run afoul of current Federal rules mandated by the new health care law that set a minimum annual dollar limit on essential benefits that health care plans must provide

in 2011, 2012, and 2013. Thus, the myth that if you like your current health care you can keep it has been exposed for around three

million employees.

Through an amorphous process shrouded in ambiguity and understood by few, the administration has exempted over 1,000 companies from certain requirements and at the same time has neglected to afford others the same accommodation.

Our first question today is substantive: In light of over 1,000

companies requesting waivers from the burdens of this law, what

did the President mean when he said, ‘‘If you like your health insurance, you can keep it,’’ and what are the failings of this law that

necessitate a waiver process to begin with?

Further, the entire waivers process is predicated on the ability

of the Secretary to grant waivers in the first instance. However,

this seemingly fundamental step—the statutory basis for waiving

compliance with the law—appears to have been wholly neglected by

the plain language of the statute. What is the legal authority by

which the Secretary can grant waivers? Where in the health care

law does it specifically grant the Secretary the authority to waive

compliance with the law?

Congress all too often in recent memory has abdicated its law

making responsibilities to employees or appointees in the executive

branch who are not elected and are not accountable via popular

election to the American people. It is not Congress’ job to simply

pass big ideas and leave the details to another entity. It is also not

the job of agencies to invent statutory authority where none exists.

However, the most important questions today concern the procedural aspects of this highly nebulous process. Initially, how were

these waivers advertised before a link was placed on the HHS Web

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site? What was the process by which subsequent waivers were applied for, reviewed, accepted, denied, determined, and appealed?

The American people expect open and honest answers to these legitimate questions. Waivers to the health care law have widespread

implications, implications that demand transparency and accountability from the Federal Government.

In order for companies to compete on a level playing field, as is

the custom in our country, they must know their burden of proof—

the standards their applications will be evaluated by. They must

know why certain companies’ applications were accepted and others were denied. There must be an identifiable process, not a labyrinthine morass of vague standards with no statutory definitions.

The waivers process, such as it is, lends credence to the conventional wisdom surrounding enactment of this transformative law.

People don’t know what is in it or how specific provisions are affecting America’s business and individuals. These are due process,

equal protection, and fundamental fairness questions that are essential to be asked and also to be answered.

[The prepared statement of Hon. Trey Gowdy follows:]

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Mr. GOWDY. I will now recognize the distinguished ranking member, Mr. Davis, for his opening statement.

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

Let me just say that in the relatively short time that you have

been chairman, you have selected two hearings that I think are

very important. I thank you first for the one dealing with education

and trying to make sure that all of our citizens have access, especially those in the city of Washington, DC. I also thank you for

dealing with health care, which is what we are going to be discussing today. So I thank you for yielding.

The subcommittee’s first hearing was on the issue of improving

access to quality public education. The second one we convened to

discuss how best to ensure the public’s access to quality health care

coverage. Given the significance of these two issues for the American people, I think this subcommittee is off to a great start.

However, I do want to point out that our colleagues on the Energy and Commerce Committee conducted a similar hearing on this

topic less than a month ago that pretty much already answered the

question as to why the waivers are needed during the 3-year implementation period. So it is my hope that today’s hearing will actually provide us a chance to conduct oversight of HHS’s mini-med

waiver process with the intent of discussing how the process could

be improved versus spending time debating whether such a process

should even exist.

With the 1-year anniversary of the enactment of the Patient Protection and Affordable Care Act just a little over a week away, today’s hearing, entitled Obamacare: Why the Need for Waivers?, basically helps to show why passing health care reform and ensuring

quality affordable coverage for all Americans was so important.

The landmark legislation called for the end of low cost mini-med

health plans which offer far too many hard working Americans inadequate benefits and a false sense of protection.

While the elimination of lifetime and annual limits on the

amount of coverage to be paid by a health insurance plan was a

key aspect of health care reform, no one really expected this sweeping and monumental change to be fully implemented overnight.

This is why the act envisioned a transition period between 2010

and 2014 to allow for the reasonable conversion of millions of people from poorly designed, limited benefit plans to plans that provide more comprehensive health care coverage.

I understand that in order to get us to the point where all Americans have access to enhanced health care coverage, the Secretary

of Health and Human Services is gradually phasing out these substandard plans in a manner that does not subject consumers to

hefty premium increases or reduce overall access to coverage.

Hence the issuance of 1 year waivers to businesses that have demonstrated their inability to meet new coverage limits this year.

Despite claims to the contrary, HHS’s Section 1001 waiver process has been transparent, as evidenced by the multiple publications

of regulations governing process in the Federal Register and the

wealth of information and guidance on the annual limit waiver application process available on HHS’s Web site.

In addition to transparency, the process has also been fair. More

than 94 percent of applicants who applied for waivers received

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them. And let the record show that most of the waivers issued

went to non-union plans.

In fact, the waiver process we are discussing this afternoon may

actually serve as a best practice example of good governance for

other agencies to follow when engaging American public and business communities.

Mr. Chairman, I am glad that today’s hearing provides us an opportunity to discuss some of the benefits of the Affordable Care Act

and its ultimate impact on improving access to high quality and affordable coverage for all Americans. I thank our witnesses for being

here with us this afternoon and look forward to their testimony.

[The prepared statement of Hon. Danny K. Davis follows:]

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Mr. DAVIS. Mr. Chairman, while I am closing, I know that there

are a number of members of the Committee on Oversight and Government Reform who are not members of this subcommittee who

may wish to participate this afternoon. I would ask unanimous consent that they be allowed to do so.

Mr. GOWDY. Without objection, so ordered.

Thank you, Mr. Davis.

The Chair would recognize the gentleman from Arizona, Dr.

Gosar, for his opening statement.

Mr. GOSAR. Chairman Gowdy, Ranking Member Davis, and our

tireless committee staff, thank you for holding this important hearing today. I look forward to delving into the important issues at

hand. Thank you also to our witnesses for sharing and appearing

today on our behalf.

Almost 1 year ago, the President signed into law what he and

the House at the time called comprehensive health care reform. At

the time, House Speaker Nancy Pelosi said, ‘‘We have to pass a bill

so we can find out what is in it.’’ As we learn more about this immense piece of legislation, we find it gives unelected bureaucrats

unprecedented ability to dictate the parameters of an individual’s

health care. It also dictates what type of coverage small business

owners can offer their employees. Needless to say, there is much

cause for concern.

Specifically, Section 1001 of this onerous law eliminates lifetime

and annual limits on the amount of coverage a health insurer is

required to pay. It turns out that millions of Americans use these

annual limit plans and are satisfied with them. So the Center for

Consumer Information and Insurance Oversight, CCIIO, was instructed by the Secretary to grant waivers to this elimination and

therefore allow businesses to continue offering annual limit plans.

On March 14, 2011, CCIIO Director Steve Larsen, who is here

with us today, said that for the first year we will set up this fairly

straightforward, simple process and that we are now in the process

of evaluating the plans out there and what is the best guidepath

to 2014. I think that today we will discover that, indeed, the waiver

process was not straightforward or simple at all.

On March 23, 2010, the so-called Health Care Reform bill was

signed into law. Only 3 months later on June 28th, Health and

Human Services issued an interim regulation that created a Section 1001 waiver. On September 3rd, the Agency issued further

guidance listing vague criteria through which individuals and employers could qualify for a waiver. On December 8th, HHS finally

issued a waiver application.

Yet even without this application, HHS granted over 300 waivers. How? What day was the first waiver granted? To date, over

1,000 waivers have been granted to Section 1001, saving 2.4 million Americans from being kicked off their health care coverage. I

submit to you, ladies and gentlemen, that HHS has not whatsoever

made this process straightforward or simple.

Take, for example, HHS’s Web site on the screen above. There

is no provision on the homepage for a waiver application or even

for OCIIO, which is now called CCIIO. Or is it EE-I-EE-I-O? I feel

like Old MacDonald Had a Farm with these acronyms.

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Let us assume that you are well acquainted with this arduous

process to search for CCIIO. It turns out that CCIIO has a homepage. If you click to the bottom of that page—follow us along—and

scroll all the way down to the bottom left, you will see Regulations

and Guidance. This is far from clear to the average Joe, who turns

out to need to click right here. Under Regulations and Guidance

see Annual Limit Waivers. Under Annual Limit Waivers there are

four, count them, four guidance regulations. Good luck combing

through those.

As you can all see from this demonstration, there is a long way

to go and a lot to examine before we can claim to have a transparent, easy process for America’s job creators to navigate this law.

Add in the cost. Where did the money for CCIIO come from? Was

it shifted from our priorities in HHS’s or CMS’s budgets like dialysis centers and others services for the needy and sick?

How did these special waivers find their way into the earliest

days of this timeline without a waiver process? Were special favors

involved? Why wasn’t a blanket waiver issued as with other flawed

parts of this attempted Government takeover of health care?

These are a mere sampling of questions I hope you are ready to

answer. I know inquiring minds throughout America want and

need to know.

Thank you, Mr. Chairman.

Mr. GOWDY. Thank you, Dr. Gosar.

HHS produced to this committee guidance concerning standard

operating procedures. I would ask unanimous consent to insert into

the record the HHS guidance governing standard operating procedures.

Hearing no objection, it is so ordered.

[The information referred to follows:]

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Mr. GOWDY. I will now recognize the ranking member of the full

committee, the gentleman from Maryland, Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman, to you and

to our ranking member.

Next week is the 1-year anniversary of the Patient Protection

and Affordable Care Act. This landmark health care reform bill

prevents insurance companies from denying children health insurance because of preexisting conditions, prevents insurance companies from dropping beneficiaries simply because they get sick, provides small businesses tax credits to extend coverage to their employees, and provides seniors with a 50 percent discount on brand

name drugs through Medicare Part D.

Another significant improvement this law made was to direct the

phaseout of so-called mini-med insurance plans that place restrictive limits on coverage. These plans provide meager benefits and

often leave patients high and dry when they become ill or are involved in an accident.

For example, a Wall Street Journal article in September 2010

featured a prominent fast food chain that offers its hourly employees a limited benefit plan that caps annual benefits at only $2,000.

This plan covers almost nothing when someone needs serious medical care. A single trip to the hospital could cost tens of thousands

of dollars and leave beneficiaries without coverage or with extensive out of pocket costs.

In July 2009, the New York Times featured a story about a man

whose limited benefit health plan capped hospital services at

$10,000. When he had to have a heart procedure, his insurance

plan covered only a fraction of his $200,000 hospital bill. As a result, he and his wife were forced into bankruptcy, like many Americans, despite the fact that he was supposedly insured.

Former health care executive Wendell Potter referred to these

plans as essentially fake insurance. The reality is that people with

mini-med plans often do not realize how terrible their health insurance is until they get sick or hurt and really need it.

The Affordable Care Act directed the phaseout of these deficient

plans, but it also gave the Secretary of HHS authority to create a

waiver process. This is a temporary fix to help employers that offer

mini-med plans whose premiums would increase in the short term

with an abrupt transition to high or no annual limit plans. In 2014,

waivers will not be necessary because consumers will have access

to comprehensive coverage through State health care exchanges

that reduce premiums by increasing competition and spreading

risk.

There have been allegations on the Republican side that the

HHS waiver process has been neither transparent nor fair but the

facts do not bear this out. According to Agency data, HHS has approved waiver applications for 1,040 plans and rejected only 65.

The overall approval rate is 94 percent. Allegations that unions

have received preferential treatment also appear unsubstantiated.

According to the same data, HHS approved 851⁄2 percent of waiver

applications from union plans or plans serving union members and

97.4 percent of non-union waiver applications.

Unfortunately, today’s hearing seems to be little more than a do

over of a hearing held last month by the Energy and Commerce

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Committee—the same allegations, the same documents, and even

the same HHS witness.

At that hearing, Ranking Member Henry Waxman issued a

memorandum analyzing 50,000 pages of documents provided by

HHS that found no merit to these allegations. I would like to make

that memo part of our official hearing record.

The memo also pointed out that various industry applicants were

in fact very happy with the waiver process, thanking HHS repeatedly for their prompt and courteous attention.

Mr. Chairman, our committee can play a positive role in making

sure the Affordable Care Act is implemented effectively. Rather

than using the 1-year anniversary to criticize a process that has

been incredibly flexible and favorable to the industry, let us work

together to make sure that real health insurance coverage is extended to 32 million Americans who do not have it today.

I am very pleased to see one of our witnesses, Steve Larsen, who

played a major role when I was in the State legislature in Maryland for 15 years. He has served in many, many roles. I can say

that of all the public servants I have worked with, he is one of the

most honorable, honest, efficient, effective public servants I have

ever met.

With that, I yield back.

[The prepared statement of Hon. Elijah E. Cummings follows:]

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Mr. GOWDY. Thank you, Mr. Cummings.

The Chair would now recognize the chairman of the full committee, the gentleman from California, Mr. Issa.

Chairman ISSA. Thank you, Mr. Chairman.

As the ranking member said, another committee has looked into

this problem. And it is a problem when over 1,000 waivers need to

be granted, whether it is 94 percent, 85 percent, or 100 percent.

You ask is the Patient Protection and Affordable Care Act ready for

prime time. The answer clearly is it is not. It was ill conceived run

through in a manner that Speaker Pelosi ‘‘wisely’’ said let’s pass it

so we can find out what’s in it. That, in fact, is the reason that

these thousands of pages are only now being analyzed to find out

that compliance is not available.

And contrary to what the ranking member said, it is likely that

a year from now waivers will continue to be granted, and a year

from then and a year from then. Why? Because, as President

Obama has admitted, it is hard to bend down the health curve. It

is hard to do some of these things. In fact, many of the goals of

the Affordable Care Act will not ever come to pass.

Health care continues to spike and spiral up. What was considered to be a Cadillac plan based on dollars just a year ago would

now be undoubtedly a Bentley plan today.

As we look at this on every committee of jurisdiction, including

ours, let us bear in mind that two million workers out of uniform

and another million workers in uniform are part of a Government

health care plan that we oversee. Additionally, Indian health care

and plenty of other plans continue to have the problem of spikes

in cost with no likelihood of abatement.

Our committee has a responsibility to find ways to insure and

protect Federal workers through an affordable health care plan. We

additionally have an obligation to see that this law passed lives up

to its goals or is rescinded.

The committee must look at this in light of its post-passage spike

in cost and the admission by the President himself that the cost

curve is, in fact, not being bent down. Sixteen million, not 32 million, uninsured Americans will be covered. They will be covered

based on Medicare, one of the most inefficient delivery systems

that we can find. So this committee is dedicated to being honest

about what a law is or is not doing and seeing that, in fact, inefficiency in government goes away.

As most members of this committee are becoming acutely aware,

Medicaid is not the right way to provide health care coverage. Yet

we continue to see waivers for conventional systems that were

vilified during the legislation while we see an expansion of Medicaid, one of the least affordable—from a cost standpoint—ways to

provide health care. It is in my State of California well known that

Medicaid patients are actually more likely to show up at an emergency room than the uninsured overall.

This and other factors tell us that we need to look at all aspects

of this, not just the 1,040 applicants granted waivers. With that,

Mr. Chairman, I thank you for doing our committee’s work.

I would reserve a point of order on the ranking member’s request

to put the work already in another committee into our record. I believe it is our practice to put in limited amounts. If there is a speVerDate 11-MAY-2000 15:25 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67370.TXT KATIE PsN: KATIE
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cific citing that the ranking member would like to limit to, I would

remove mine. But to simply put Mr. Waxman’s full activities in I

think would be inappropriate. He left this committee. He is in another committee. It is in his record.

With that, I yield back.

Mr. GOWDY. Thank you, Mr. Chairman.

The Chair would now recognize the gentleman from Missouri,

Mr. Clay, for his opening statement.

Mr. CLAY. Thank you, Chairman Gowdy.

When a party is in the minority, without the authority and responsibilities of the majority, some nuisance tactics are to be expected. But being in the majority changes things, or at least it

should.

Take, for instance, the title of this hearing. The use of the term

Obamacare is not helpful in any way. I think it is purposefully provocative. We all know that using a negative catchy term for the

President’s signature domestic program, a program that affects

each and every American in many positive ways and fundamentally

reforms health care in this country for the better, is red meat for

red States. We all know that.

The Affordable Care Act protects sick people from being dropped

by insurance companies because they get sick. If my Republican

colleagues believe that insurance companies are to be allowed to

drop sick people from coverage once they get sick, they ought to say

it. The health care reform legislation protects people from being denied coverage by insurance companies because they have preexisting conditions. If someone really believes that insurance companies

ought to be able to deny coverage to people with preexisting conditions, they should say so.

Health care reform, an unfulfilled dream of both Republican and

Democratic presidents for decades, means positive changes for virtually all Americans. If you want to roll back the progress that we

finally achieved and leave Americans without health insurance,

without health care, and without health, you should tell the American people that straight out.

But clearly it is unhelpful to use misleading terms and slogans

like death panels and Obamacare. Reducing the President’s signature domestic program, one that benefits all Americans, to a misleading term detracts from real oversight. It is also unfair. It would

be like Democrats reducing the previous administration’s signature

domestic program that benefited all Americans. Well, if someone

could remind me what that was, it would be unfair to call that program a negative nickname, too.

Mr. Chairman, I yield back.

Mr. GOWDY. Thank you, Mr. Clay.

I would point out that people within this very administration

have called this piece of legislation Obamacare. I do not recall any

moral outrage at the use of the terms Bush Tax Cuts, Bush Wars,

Reganomics, or Carter Malaise.

[Simultaneous conversations.]

Mr. GOWDY. Anyone who doesn’t want to use the phrase

Obamacare does not have to use it.

Mr. CLAY. But it was paid for or implemented by tax reform. So

what does it mean anyway?

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Mr. GOWDY. Mr. Clay, are you through?

Mr. CLAY. I am through.

Mr. GOWDY. I would like to welcome the witnesses at this point.

Let me also say this: Members may have 7 days to submit opening

statements and extraneous material for the record.

We will now welcome our panel of witnesses. We will start with

Mr. Steve Larsen, who is the deputy administrator and director of

the Center for Consumer Information and Insurance Oversight at

the Centers for Medicare and Medicaid services. Previously he has

served as the Director of Oversight at the Office for Consumer Information and Insurance Oversight when it was within the immediate Office of the Secretary of HHS.

I ask a moment of your indulgence.

[Pause.]

Mr. GOWDY. With your indulgence, I will introduce everyone.

Then we will start with you, Mr. Larsen, and go on if that is OK

with our witnesses.

I will apologize in advance. My South Carolina upbringing may

not allow me to pronounce Haislmaier correctly. I am willing to get

it right if you will correct me and tell me what it is.

Mr. HAISLMAIER. It is Haislmaier but I even have relatives who

call it Haislmaier.

Mr. GOWDY. Well, Haislmaier. Ed Haislmaier is the senior research fellow at the Center for Health Policy Studies at the Heritage Foundation.

Scott Wold is an attorney at Hitesman and Wolf, an employee

benefits law firm located in Minneapolis, MN. Mr. Wold’s practice

focuses almost exclusively on employee benefits.

Ms. Judy Feder is a professor at Georgetown University where

she also served as dean of Georgetown’s Public Policy Institute

from 2000 to 2008. She is currently a fellow with the Center for

American Progress.

Welcome to all of you. Let me swear you first. I thought I was

getting away from that when I left the DA’s office. [Laughter.]

Let me find the oath. I am going to get you to all rise. Raise your

right hands.

[Witnesses sworn.]

Mr. GOWDY. Let the record reflect that all the witnesses answered in the affirmative.

We will start, Mr. Larsen, with you. We will recognize you for

your 5 minute opening statement and then we will move from my

left to right, your right to left, and finish with Dr. Feder.

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STATEMENTS OF STEVEN LARSEN, DEPUTY ADMINISTRATOR

AND DIRECTOR, CENTER FOR CONSUMER INFORMATION

AND INSURANCE OVERSIGHT, CENTERS FOR MEDICARE

AND MEDICAID SERVICES; EDMUND HAISLMAIER, SENIOR

RESEARCH FELLOW, CENTER FOR HEALTH POLICY STUDIES, THE HERITAGE FOUNDATION; SCOTT WOLD, SHAREHOLDER, HITESMAN AND WOLF; AND JUDITH FEDER, PROFESSOR, GEORGETOWN UNIVERSITY AND SENIOR FELLOW,

CENTER FOR AMERICAN PROGRESS ACTION FUND

STATEMENT OF STEVEN LARSEN

Mr. LARSEN. Thank you, Chairman Gowdy, Ranking Member

Davis, and members of the subcommittee. Thank you for the

chance to appear before you this afternoon.

My full testimony has been submitted for the record.

I serve, as was mentioned, as deputy administrator of CMS and

director of the Center for Consumer Information and Insurance

Oversight [CCIIO], within CMS. Since taking on this role I have

been involved in implementing many of the provisions of the Affordable Care Act including overseeing private health insurance reforms, establishing the health insurance exchanges, and ensuring

that consumers have access to information about their rights and

coverage options.

Prior to becoming director of CCIIO, I served as the director of

the Office of Oversight, which worked with the States to implement

the new insurance rules.

As director of CCIIO, I am committed to improving the health insurance system so that it works for consumers and businesses, both

now and in 2014 when consumers and businesses will have more

quality health care options. As part of improving the current health

insurance system, the Affordable Care Act ensures that consumers

are provided meaningful and reliable coverage for their premium

dollars by phasing in restrictions on the annual limits insurance

policies between now and 2014, the subject you have asked me to

discuss today.

Right now, about 160 million Americans get their health insurance through an employer. However, not all coverage offered by

employers is the same. A very small percentage of employees are

offered policies with low annual limits—caps on the amount of benefits that are provided under the policy in a given year. Often these

policies are provided by employers who hire lower wage, part-time,

or seasonal workers.

While having such limited coverage may be better than no coverage at all, this coverage unfortunately can fail those that need

it most. These policies can have high deductibles and annual dollar

caps as low as $2,500. Some are better with $5,000 or even $25,000

in coverage but in the case of a serious illness or accident, the coverage can be inadequate.

In 2014 consumers will be able to purchase fuller health insurance coverage in State-based exchanges but, in the time between

now and 2014, we need to maintain coverage for the small percentage of employees with these limited policies until better options are

available for them in 2014. Immediate compliance with the new AfVerDate 11-MAY-2000 15:25 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67370.TXT KATIE PsN: KATIE
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fordable Care Act provisions on annual limits could cause disruption of this coverage.

The Affordable Care Act specifically directs the Secretary to implement the restrictions on annual limits in a manner that ensures

continued access to coverage. This is accomplished by phasing in

the annual limit restrictions for most policies and, for this year, we

established a waiver process. All employers and insurers that offer

limited benefit plans may apply for a waiver if they demonstrate

that there will be a significant increase in premiums or a significant decrease in access to coverage without a waiver. Applying for

a waiver is simple and basic with only five elements that CCIIO

has clearly published on our Web site.

It is important to note that more than 30 percent of applicants

have fewer than 100 enrollees. Small businesses are able to take

advantage of this as well as large ones. We administer the process

fairly without regard to the type of applicant or size of business.

We have published our standards for reviewing the applications

in the regulations implementing the law and again in the bulletins

implementing the regulations.

The vast majority of waivers, more than 94 percent, were granted to health plans that are employer-based. Of the waivers approved, 41 percent were to self-insured employer plans, 31 percent

to HRAs, 23 percent to Taft-Hartley plans—these are employer

plans governed by collective bargaining agreements—and 3 percent

to issuers. Only 2 percent of waivers have been granted to union

plans.

The limited benefit plans for which waivers are allowed cover an

extremely small portion of people who have employer-sponsored

coverage. Since setting up this waiver program, CCIIO has granted

waivers to plans covering less than 2 percent of all covered people

in the private insurance market.

The vast majority of employers who applied for a waiver have

also reacted to the application process positively. We have been

open to feedback from applicants and, based on their input, we improved the application process so that it is timely and responsive

to their needs.

Thank you for the privilege of appearing before you. I would be

happy to answer your questions.

[The prepared statement of Mr. Larsen follows:]

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Mr. GOWDY. Thank you, Mr. Larsen.

Mr. Haislmaier.

STATEMENT OF EDMUND HAISLMAIER

Mr. HAISLMAIER. Thank you, Mr. Chairman.

In keeping with your opening remarks that the policy issues are

for other committees, in particular the Energy and Commerce Committee, which would have jurisdiction, I am not going to address

that. I will note that in my prepared remarks I did give a brief

overview of the policy issues just to give the members of the committee some background.

There has been some discussion of the policy issue here. In that

connection, I would simply like to make one point that came up in

some of the Members’ statements. I think it is somewhat relevant

here as a policy background.

When you look at the statute, Congress’ intent in this is unclear.

To say that Congress intended to phaseout these plans is actually

not true. There is no evidence that Congress intended to do that.

This was not in the House bill. There were no hearings on this provision that I am aware of in the Senate bill. That may have been

the intention, but there is no evidence. One can also say that there

is no evidence of the other, too, that there was any intention to exempt or preserve these things. So Congress has presented a piece

of statute here that is unclear. That is the first point.

The second point is with regards to Mr. Larsen and others who

discussed a phase out, it is important to understand that the

phaseout that Mr. Larsen and others are discussing is, again, a

construct that HHS comes up with. There is no requirement, suggestion, or any other element in the statute with respect to a

phaseout.

Now, what we get to in the end of my testimony and what is

really at the heart of the question this committee, I think, is dealing with is whether this whole process is actually appropriate. I

think that is a valid question.

In looking through the statute and the regulation, I was able to

find, in my view, no actual explicit justification for HHS taking the

actions that they have in doing the waiver. So regardless of what

one thinks about these particular plans or what one thinks about

whether Congress intended to get rid of them, intended to keep

them, intended to do it quickly or later, the question relevant to

this committee is, does HHS have the authority to do it? It does

not appear to me that they do, but I am open to hearing the arguments of people who maybe have more expertise in regulatory law

than I do.

The other question that occurred to me is, could a reasonable

case be made by HHS that, whether it had authority or not, Congress had put it in an impossible situation in the statute and that

the Agency or the Department could only resolve the statute

through the waiver process. As I indicate in my testimony, again,

I do not find that to be the case either.

Congress seems to have simply asked HHS for one very simple

thing: Fill in a number. Congress decided that instead of setting a

dollar limit in the statute for the interim years, it would delegate

that to HHS to come up with a number. That is what the statute

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plainly says. So, interestingly enough, HHS came up with three

numbers.

When I read the regulation, and I was just looking over it again

here while I was waiting, I don’t see in the regulation, maybe Mr.

Larsen could point to me if I missed something, any explanation

of how they arrived at the numbers $750,000 or $1.2 million or $2

million. Indeed, in the table of data that they present, and I am

not questioning the data, the breakouts aren’t according to that.

The breakout is half a million dollars to a million dollars. Well,

how did you get $750,000, which is in the middle? There is nothing

that tells me. There is no idea in here as to where these numbers

came from or why they did a 3-year phaseout.

All Congress asked them to do was set an interim—an, one interim—number. So clearly, in my view, the statute doesn’t require

this. HHS could have responded to the requirements of the statute

by simply taking the analysis in the regulation and saying that,

based on the foregoing analysis, the number prior to 2014 shall be,

and set the number. Everyone would then have known what it was

and could determine on their own whether they needed to comply

or not.

Finally, the question is a public policy question of whether this

kind of waiver process is appropriate or desirable in public policy.

I would argue for several grounds that it is not desirable for this

particular kind of a waiver process in public policy. While there is

no evidence I am aware of of corrupt practices, it certainly invites

the temptation or the opportunity for favoritism. It certainly does

provide for unequal application of the law. It furthermore creates

the perception, and possibly the fact, that the regulatory process is

being used or subordinated to political ends as opposed to simply

enforcing the law that Congress wrote.

So I think there are many reasons to question the suitability of

the entire process.

Thank you for your patience and your time, Mr. Chairman. I will

be happy to answer questions from the committee.

[The prepared statement of Mr. Haislmaier follows:]

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Mr. GOWDY. Thank you.

Mr. Wold, we will recognize you for your 5 minute opening statement.

STATEMENT OF SCOTT WOLD

Mr. WOLD. Thank you, Mr. Chairman and members of the committee.

As you mentioned, I am an employee benefits attorney. On a

daily basis I work with employers both large and small with respect to their employee benefits plans. So in the last year since the

Patient Protection and Affordable Care Act was passed, as you can

imagine, we have spent a large amount of time working with this

particular law as it applies to our clients and their plans. I am here

today to talk about one particular aspect of that experience over

the last year, that is with respect to the waivers from the annual

limit restrictions.

First I would like to note how as an attorney I became aware of

this program or this process. We did review the legislation, at least

the parts of the legislation that applied to employer benefit plans.

And we did very closely monitor regulatory implementation. When

the regulations came out, we took a close look at those. So the first

time I learned of the possibility of a waiver program was in June

when the regulations on the annual and lifetime limit restrictions

were published.

I noted in reviewing those regulations that there was authority

given to the Department to issue or create a program providing

waivers for certain types of plans.

The regulations didn’t contain a lot of detail and so we didn’t

really learn much about the program itself until later in September

when the first piece of guidance was issued regarding the program

itself.

As an attorney we subscribe to a number of different benefits

news publications, I guess I would call them. Typically they are online. So either daily or weekly we get informed of different developments that are occurring in the employee benefit area. It was

through those processes that we learned about the guidance being

issued with respect to the waiver program, and of course we went

out and reviewed it. I am not aware whether it was publicized in

any other way, but that is how I became aware of it and as an attorney we certainly monitor those types of things.

One of the things that we then did was we worked with a number of employers in applying for the waivers. Most of our experience was not in the context of mini-med plans. There has been discussion of mini-med plans and how the waivers are applicable to

them. We do have clients with mini-med plans and have applied for

waivers for those plans. But a number of our clients and most of

our experience in this area has to do with health reimbursement

arrangements.

Health reimbursement arrangements are not traditionally

thought of as mini-med plans. They are typically used to supplement other group health plan coverage. They are an account-based,

defined contribution health plan. The employers will make those

available so that employees can have dollars to use to reimburse

out of pocket expenses.

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HRAs have really been, I would say, largely ignored in this whole

process. They are group health plans and they are subject to these

rules in general. In the preamble to the interim regulations there

was a specific exemption provided to certain health reimbursement

arrangements, something called integrated HRAs. The problem was

that there was no definition or any guidance provided as to what

an integrated HRA is. So there has been a lack of clarity in the

benefits community about which HRAs are subject to these annual

limit restrictions and which are not.

In addition, it was never clear, at least from the published guidance, whether HRAs could apply for waivers. The guidance talked

about mini-med plans or limited benefit plans but there was no

mention of HRAs. We did some investigation. We called the Department and informally got an answer that, yes, HRAs could

apply for these. That is how we were able to go through that process with our clients who sponsor HRAs.

The difficulties we experienced, especially with our clients who

sponsor health reimbursement arrangements, suggest to me that

the waiver process was not the best method to go about providing

this relief. I won’t take a position on whether the relief was actually needed or a good idea, but I think once it was decided that

some of these plans would have time to continue to be maintained

as they were, the waiver process created a number of challenges to

employers. There may have been a better way to do that.

Thank you.

[The prepared statement of Mr. Wold follows:]

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Mr. GOWDY. Thank you, Mr. Wold.

Dr. Feder.

STATEMENT OF JUDITH FEDER

Ms. FEDER. Thank you, Chairman Gowdy, Ranking Member

Davis, and members of the subcommittee and committee. I am glad

to be with you today. I am happy to testify on the Affordable Care

Act and its implementation.

Because of its importance, an ever growing body of research tells

us that assuring Americans affordable health care and affordable

insurance matters enormously to their health and well-being. As

you noted in the outset, almost exactly a year ago the Affordable

Care Act [ACA], was enacted to provide that assurance. The law

assures most, if not all, Americans essential health insurance coverage by building upon, not replacing, the current health insurance

system, securing what works and fixing what doesn’t.

Today, about 170 million Americans get health insurance

through employment. The Affordable Care Act strengthens jobbased health insurance through consumer protections like the prohibitions on annual or lifetime limits on benefits and through penalties on employers with more than 50 employees who use newly

available tax credits to purchase insurance directly because their

employers do not offer affordable coverage. According to the Congressional Budget Office, under the ACA, job-based coverage will

remain in the future the primary source of health insurance coverage for working Americans that it is today.

At the same time that the Affordable Care Act secures what

works in providing health insurance, it fixes what is generally recognized as broken—the non-group health insurance market. Although in theory people who do not get coverage through their employers can buy it on their own, in practice the non-group market

is not a safety net. On the contrary, insurers survive in this market

by attracting and ensuring that they attract consumers when they

are healthy and avoiding us when we are sick.

To address this problem, the Affordable Care Act takes what is

often referred to as a three-legged stool approach. You need all

three legs to make the stool work. Unless we require health insurers to take us all, regardless of our health needs and without extra

charges for preexisting conditions, people will be denied coverage

they need. Insurers can only accept all comers if they can expect

all of us to buy insurance when we are healthy and not to wait

until we are sick. We can only expect everybody to buy health insurance if they get help to pay premiums if they can’t afford them,

help the ACA provides in the form of tax credits.

The Congressional Budget Office estimates that with arrangements under the ACA, about 19 million people will be covered

through health care exchanges and receive tax credits by 2019. Another 16 million people on top of coverage projected under pre-ACA

law will be covered through Medicaid.

This Medicaid expansion reflects another fix in the ACA. Today,

the same low wage workers whose employers don’t offer coverage

have been denied Medicaid benefits as well, no matter how low

their incomes. Fortunately, the ACA brings an end to this discrimination by extending Medicaid at full Federal expense to all individVerDate 11-MAY-2000 15:25 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67370.TXT KATIE PsN: KATIE
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uals whose incomes fall below 133 percent of the Federal poverty

level.

Though sorely needed, changes in our health insurance system

can’t take place overnight. The ACA is designed to strengthen and

extend the health insurance coverage Americans count on, not to

disrupt it. The law recognizes that building new marketplaces will

take time. Until the full set of new insurance rules and subsidies

are in place, people who have inadequate coverage may want to

hold onto it despite its limitations. Therefore, the administration

has been willing to grant waivers from some of the law’s early requirements which, if fully imposed, might leave some people with

nothing.

The aim of the law’s early requirements and benefits is to make

matters better without making them worse until the full law goes

into effect in 2014. Far from indicating weaknesses in the Affordable Care Act, these waivers reflect its strength in matching requirements with capacity. It behooves administrators of the ACA to

be sensitive to disruptions alongside improvements and to assure

a balance that enhances people’s protections as the law intends. It

behooves overseers of the law’s implementation to recognize the big

picture, the enormous problems the Affordable Care Act was enacted to address.

It is designed to strengthen what works, fix what is broken, and

avoid unnecessary disruption. Its potential, when fully implemented, is to end discrimination based on preexisting conditions

and assure most, if not all, Americans access to affordable health

insurance coverage. All of us should be working to make sure that

we move as quickly and as smoothly as possible to get us from here

to there.

Thank you, Mr. Chairman.

[The prepared statement of Ms. Feder follows:]

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Mr. GOWDY. Thank you, Dr. Feder.

Let me say this to our witnesses and to our guests in the audience: One thing that you will find total unanimity on in this subcommittee is our desire to be good stewards of your time as well

as the time of the people who are gracious enough to be with us.

I am informed that votes are imminent. What I would propose to

Mr. Davis and to my colleagues is that we continue on until votes

are called, that we adjourn long enough to go cast our votes, and

then that we come back and that we do it as quickly as we can to

be good stewards of your time.

I will recognize myself for 5 minutes at this point.

Mr. Larsen, I am not going to spend any time quarreling about

the statutory authority for waivers. I am not even going to discuss

the substantive aspects of the health care law. What I want to

focus on is the waiver process.

Can you tell me when the waiver process was first made public?

Mr. LARSEN. Yes, thank you, Congressman. I think, as was mentioned, the regulations that identified the phase in of the annual

limits as well as the waiver process were published, the interim

final rules, in June. Within 90 days of that, I think on September

3rd, we published the first bulletin that laid out the waiver process

and what we think were very simple and straightforward provisions of the application process for the public.

I think it was mentioned that there wasn’t an application initially. In fact, in order to make the process very simple, we just

laid out the types of information that an applicant could provide.

Later on as we got more applications, to improve the process we

did develop a form that people were to use online, a spreadsheet

if you will.

Mr. GOWDY. Let us assume it is September 3rd. Were there applications for waivers that were made prior to September 3rd?

Mr. LARSEN. Not to my knowledge.

Mr. GOWDY. Were there waivers granted prior to September 3rd?

Mr. LARSEN. Not to my knowledge. We didn’t have the application process set up.

Mr. GOWDY. That is my point.

Mr. LARSEN. Right.

Mr. GOWDY. Are you sure there were no requests for waivers

prior to September 3, 2010.

Mr. LARSEN. Requests for waivers?

Mr. GOWDY. Requests. Applications or requests.

Mr. LARSEN. I have been advised that there were three.

Mr. GOWDY. What process did you use, given the fact that there

was no public process that had been promulgated at that point for

those three?

Mr. LARSEN. I assume that they were held until we set the process up. That is my assumption.

Mr. GOWDY. When you say process, are you referring to the regulation that used the words large and significant?

Mr. LARSEN. No, when I say we set up the process, I am referring to the bulletin that we issued in September. That was when

we identified that there was a process in place. We issued the regulation and then we established the process through what we reVerDate 11-MAY-2000 15:25 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67370.TXT KATIE PsN: KATIE
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ferred to as sub-regulatory guidance, which is the bulletin that we

put out in September.

Mr. GOWDY. So your testimony is that there were three applications, whether that is formal or informal, for waivers prior to September 2010?

Mr. LARSEN. That is my understanding, but I would like to confirm that for the committee.

Mr. GOWDY. OK. So how did the companies know the process before you promulgated the regulations?

Mr. LARSEN. Well, again, the regulations were issued in June. I

would say the regulations did two things among many others. This

was part of a broader regulation. But with respect to the annual

limits provisions, we established the tiered phase in for annual limits.

After looking at what was happening in the marketplace and

what types of annual limits were out there, we established for the

first year the $750,000 restricted annual limit.

Again, it is very important to note that the statute specifically

contemplates that there will be no annual limits in 2014 but what

it refers to as restricted annual limits——

Mr. GOWDY. Well, I wasn’t going to go to the statute but if you

are going to bring it up, you will also have to concede nowhere does

it grant the Secretary the express power to grant waivers.

Mr. LARSEN. I am not sure I would agree with that because the

clear reading of what is there is that there will be a phase in of

the annual limits provisions.

Mr. GOWDY. Well, the word waiver does not appear anywhere in

the statute. Would you agree with me there?

Mr. LARSEN. Well, I will agree that the word waiver does not appear in that particular section.

Mr. GOWDY. OK, that is the one we are talking about.

Mr. LARSEN. But I don’t think that is, as a lawyer at least, the

normal test for whether it is reasonable to interpret a statute——

Mr. GOWDY. Speaking like a lawyer, let me ask you——

Mr. LARSEN. I know you are a lawyer, sir.

Mr. GOWDY. Not much of one, I was just a prosecutor. [Laughter.]

Let me ask you this: If there is a denial, is there an appeals process. What burden of proof does an applicant have to make to be

considered, rejected, and then considered again?

Mr. LARSEN. Actually, we do have a reconsideration process.

Again, it is a very simple process. We consistently were guided by

the principle of making this as easy and as simple as possible. We

advise applicants that if they are denied, they can ask for reconsideration. We will work with them to collect whatever additional information we need to look at the application again.

So there isn’t a hard and fast burden of proof because our goal

in implementing this provision was to ensure that employees could

continue the coverage they had. We didn’t want to make it burdensome. In fact, if we had to make a choice, our objective would be

to err on the side of making sure that people could continue their

coverage. We weren’t out to deny people. We wanted to make sure

that people could continue their coverage.

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Mr. GOWDY. I have run into the red light so I will now recognize

my colleague from the State of Illinois, Mr. Davis.

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

You know, I was just thinking I know people who swear at lawyers and I know others who swear by lawyers. So it just depends

on who you are looking at.

Mr. Larsen, the new health care law is intended to phaseout

what we call mini-med plans. These plans provide low benefits and

often leave consumers high and dry when it comes to actually

using them to access medical care. We have heard many horror stories about people who rely on these plans thinking that they are

insured, only to get sick or have an accident and be left with nothing.

In July 2009, for example, the New York Times featured a story

about a man whose limited benefit health plan capped hospital

services at $10,000. He had to undergo a heart procedure and his

hospital bill was $200,000. When it came time to pay, his plan provided next to nothing. He and his wife were forced to declare bankruptcy despite the fact that he was supposedly insured.

Mr. Larsen, some might conclude that these plans should be prohibited immediately. Can you tell us, simply, why do we need these

waivers at all? Why not just prohibit these horrible plans outright?

Mr. LARSEN. Yes, sir. What you describe, I think, is the dilemma

with these plans. They provide some coverage for the employees

that can purchase them but in too many cases they don’t provide

sufficient coverage or people don’t understand that, in fact, they

don’t have coverage. So with a day or two in the hospital, they have

reached their limits.

These really are a bridge to 2014 when fuller, more comprehensive, and affordable coverage will be available. Although this is not

great coverage, or good coverage in some cases, it is some coverage.

We want to make sure that people can maintain access to that coverage through this process. So the waiver process permits individuals to continue that type of coverage until better coverage is available in 2014.

Mr. DAVIS. Now let us take a look at the other side of this argument. There are those who have argued that since you are approving 94 percent of the waiver applications, that means the underlying health care law must be flawed. For example, my good friend,

Representative Cliff Stearns, Chairman of the House Energy and

Commerce Subcommittee on Oversight and Investigation puts it

this way, ‘‘If the law,’’ that is the Affordable Care Act, ‘‘is so good,

why are so many waivers to the law being granted?’’

How do you answer or respond to that?

Mr. LARSEN. I would respond that the waiver provision that was

contemplated in the statute shows that the law is, in fact, working

because it allows employees to continue this coverage. Remember

that it is a small percentage of employees, less than 2 percent.

Most people who have coverage have much more comprehensive

coverage. This allows them to continue it.

So I would argue or submit that it shows that the law is working. The majority of policies that can meet the annual limits with

minimal impact on premiums will do so. And the statutory goal is

to ensure that we are phasing out the annual limits in 2014.

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Mr. DAVIS. Then why won’t the same employers that are seeking

waivers today seek them in 2014?

Mr. LARSEN. At that point, we will be much farther along in the

reform of this very broken health care system. It is important to

keep in mind that these fixes are a result of a broken system where

people are denied coverage for being sick, are having their policies

rescinded, or have limited benefits. In 2014, more comprehensive,

affordable coverage is available for employees of small businesses

and individuals.

Mr. DAVIS. Thank you very much, Mr. Larsen.

It reminds me of when my father was explaining the differences

between how people see things. If you ask is it fair for birds to eat

worms, you get a different answer depending on who you ask. If

you ask the bird, you get one answer. If you ask the worm, you get

another answer. I guess they both feel that they are right.

Mr. LARSEN. I hope I am the bird. [Laughter.]

Mr. GOWDY. Thank you, Mr. Davis.

The Chair would recognize the gentleman from Arizona, Dr.

Gosar.

Mr. GOSAR. Mr. Larsen, when did Health and Human Services

first know about the two million Americans, when they would lose

their health care coverage even if they liked it? When did you first

know that two million Americans would lose their health care

based upon this provision?

Mr. LARSEN. I am not sure I am following your question.

Mr. GOSAR. Well, let us go further. President Obama clearly said,

‘‘If you like your health care plan, you can keep it.’’

While limited, mini-med plans provide some coverage to about

two million people. True?

[No response.]

Mr. GOSAR. About 1.8 million, to be exact. But the law as written

and as understood, and we are talking about attorneys—I am not

an attorney, I am a dentist—of 7–11, Lowes, National Restaurant

Association, National Retail Federation, and the US Chamber of

Commerce, the bill as written eliminated this health care coverage,

period. Is that true or not true?

Mr. LARSEN. Not true. As I described earlier, it does two things.

It sets up a phase in of restricted annual limits leading to no annual limits in policies but preserves the ability for this small part

of the market that has very, very low annual limits to continue

until we get to 2014.

Mr. GOSAR. Did you know those groups met with the Secretary

for Health and Human Services in June of last year about that

very issue?

Mr. LARSEN. I don’t think I did. We had meetings with groups

as well to talk about the development of the waiver process. I don’t

know who met with the Secretary, specifically.

Mr. GOSAR. Who was involved in developing the waiver process?

Mr. LARSEN. We developed the waiver process, HHS.

Mr. GOSAR. On your own with no outside inference at all?

Mr. LARSEN. No, our staff developed it. We looked at the regulation. We met with stakeholders who had an interest in the process.

We took their suggestions to heart, which were to keep it simple,

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to make it easy to apply, to make it prompt so that it didn’t take

too long.

I think we did all of those things. We have a 30 day turnaround

time. Again, we think it is simple to use. We have gotten a lot of

positive feedback from a number of groups that, in fact, it is very

straightforward.

Mr. GOSAR. Mr. Wold, the whole process of this waiver, would

you call it cumbersome or straightforward?

Mr. WOLD. I would say somewhere in between, probably. In some

cases, it worked very well for our clients. In other cases, it didn’t.

There were certainly issues with respect to identifying what information needed to be provided, at least for the early applications

that we submitted before the application form was released. We developed our own template form that we used based on the guidance

that was in existence. In some cases, that worked. In other cases

our clients heard back that no, they need to provide some additional information or no, we have this form now and they need to

provide that. So there were some cumbersome aspects to it.

Mr. GOSAR. If you were trying to help people along and trying

to work with them, would you put the waiver form on the sixth

page, hidden away in your Web-based application?

Mr. WOLD. No, I wouldn’t. When we worked with our clients, we

issued what we call a client alert to all of our clients notifying

them of this waiver process. We had found the link, obviously, by

that time and included the link. I would have made it more prominent, yes.

Mr. GOSAR. OK. So if you were from outside Washington, DC—

God forbid—and maybe back out in Arizona or California or whatever, this is an arduous process, is it not?

Mr. WOLD. I think it is for the average employer, yes. In part,

that is why they come to benefits attorneys to help them with that

process. But I think that if you didn’t have the means to hire a

benefits attorney or didn’t have a third party who is an expert in

the benefits field, for the average employer it would be arduous.

Mr. GOSAR. So Mr. Larsen, we spent some considerable effort

upon this Web design. We spent a lot of time and energy trying to

incorporate the waiver process, did we not? It came at quite an expense in time.

Mr. LARSEN. I am sorry?

Mr. GOSAR. To develop the waiver process and to put it on a

Web-based system took some time?

Mr. LARSEN. You mean for HHS?

Mr. GOSAR. Yes.

Mr. LARSEN. No, I would not describe it as a large expense. We

had a number of staff working on it. Again, we tried to keep it simple. We put it on the Web site. We put out a press release.

Most small businesses even and larger businesses have their

benefits administered by these third party administrators who, by

all indications we got, were very familiar with this process and

were aware of the process. I am not aware of feedback that we got

that people were not aware of this or troubled by it. Even Mr. Wold

found it. He spoke with HHS people. He got his questions answered, I think. I don’t want to speak for him but I have read his

testimony.

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Mr. GOSAR. Thank you, Mr. Chairman.

Mr. GOWDY. Thank you, Dr. Gosar.

The Chair would recognize the gentleman from Maryland, Mr.

Cummings, for his 5 minutes of questions.

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

Mr. Larsen, some of your critics have raised questions about the

Secretary’s authority to issue waivers that allow limited benefit

plans to be extended and gradually phased out by 2014. For example, in a February 10, 2010 letter to you, Chairman Issa said that

it was unclear which section of the Patient Protection and Affordable Care Act grants authority for HHS to waive the statutory provisions that end limited benefit plans.

As I understand it, the Affordable Care Act added section 2711

to the Public Health Service Act. There is a clear language in that

section that states, ‘‘The Secretary shall ensure that access to needed services is made available with a minimal impact on premiums.’’

Is that right?

Mr. LARSEN. That is correct, sir.

Mr. CUMMINGS. That is where you get your authority?

Mr. LARSEN. We think that authority is clear in that provision.

Mr. CUMMINGS. As I understand it, this section gives the Secretary the authority to pursue a mechanism to phaseout limited

benefit plans by 2014, but to do it in a way that has minimal impact on those plans.

Under this provision, the Secretary issued an interim final rule

that explains in detail that issuing short term waivers would help

phaseout these plans with minimal impact. Is that right?

Mr. LARSEN. We did both phaseout annual limits and reference

the waiver process for mini-meds, yes.

Mr. CUMMINGS. I thought about this a bit. You seem like you

would be damned if you do and damned if you don’t. If you don’t

give some people some leeway for these mini-med plans to continue, people will say you threw people out of their insurance. On

the other hand, when you provide a waiver for them to continue

it, they say that the program doesn’t work, although it isn’t supposed to be fully functioning until 2014. That is a bit of a dilemma

there.

Would you agree? You don’t have to agree with what I just said.

I am just wondering.

Mr. LARSEN. I think I have said previously that I think that had

we not been granting waivers for this small number of low limit

policies, people would be arguing that the law was ineffective. So

we are, as the President suggested, allowing people to keep their

coverage through 2014. It is not specifically contemplated in the

statute and so it is being suggested that we are not following the

law.

Mr. CUMMINGS. Your office was given responsibility to issue this

guidance, address applicant questions, and review applications for

suitability. Is that right? Is that part of your job?

Mr. LARSEN. Yes, sir.

Mr. CUMMINGS. The committee staff reviewed hundreds of pages

of comments submitted by interested parties regarding the waiver

process. They had trouble finding any submissions that indicated

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concern with the Secretary’s authority to issue the waivers under

this provision. Did you know that?

Mr. LARSEN. I am aware that, in fact, most if not all the comments are supportive of the waiver process.

Mr. CUMMINGS. Generally, I would assume that the industry supports the waiver process?

Mr. LARSEN. It does.

Mr. CUMMINGS. How do you know that? You haven’t had any

complaints from the industry? I am sure they didn’t come running

into your office saying, hallelujah, we love this.

Mr. LARSEN. Well, we have gotten comments on the interim final

rule which were supportive of the waiver process. And in the

course of administering the process as well, we have received positive feedback both from individual applicants and trade groups associated with businesses that need waivers.

Mr. CUMMINGS. Some critics have suggested that the process by

which annual limit waivers have been issued is biased in favor of

certain groups such as unions. For example, in the February 10,

2010 letter to the Secretary, Chairman Issa made this statement:

‘‘The current process gives credence to the perception that bureaucrats are picking winners and losers in a politicized environment

where the winners are favored constituencies of the administration.’’

Is that accurate?

Mr. LARSEN. That is not true. We do not favor any particular

type of applicant or any applicant from a particular sector. We

have applied the standards that we set out fairly across all the applicants.

Mr. CUMMINGS. Is political support for the Obama administration

or health care reform a factor your Office uses in evaluating applications for annual limit waivers?

Mr. LARSEN. It is not.

Mr. CUMMINGS. You understand you are under oath?

Mr. LARSEN. I do, sir.

Mr. CUMMINGS. I think that will be it. I yield back.

Mr. GOWDY. Thank you, Mr. Cummings.

The Chair would recognize Dr. DesJarlais.

Mr. DESJARLAIS. Thank you, Mr. Chairman.

Dr. Feder, I guess we will start with you. I was listening to your

testimony and you seemed pretty confident about the upcoming

success of the Obamacare, or ACA as you call it. How would you

rate the Government’s management of the Medicare system right

now?

Ms. FEDER. Of the Medicare system?

Mr. DESJARLAIS. Yes.

Ms. FEDER. I know that the Medicare system is extraordinarily

effective in assuring access to affordable health care for the Nation’s seniors and those people with disabilities that it covers. It

has been so for some years. That does not mean that it does everything right.

One of the advantages of the Affordable Care Act is the new

mechanisms it creates to reform payment mechanisms in Medicare

to make it much more efficient.

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Mr. DESJARLAIS. Do you think Medicare is efficient and financially stable right now?

Ms. FEDER. I think that health costs are rising. Medicare’s rate

of growth in health care cost per capita has actually over the last

multitude of years been slower than growth in the private sector.

Mr. DESJARLAIS. Do you think health care costs are going to stop

rising?

Ms. FEDER. I think we are going to have to do everything we can

to make us get better value for the dollar in the system.

Medicare has in the past been a leader in that effort. The private

sector has followed when Medicare has been a leader and I think

that is what we need again.

Mr. DESJARLAIS. Do you think Medicaid is a good system and

that it is financially stable?

Ms. FEDER. When you talk about payment, Medicaid is paying a

very low rate.

Mr. DESJARLAIS. Is it a broken system?

Ms. FEDER. No, it is not a broken system. It is the Nation’s long

term care safety net and enormously valued for covering those that

it protects.

Mr. DESJARLAIS. OK. So you think that the Federal-run programs right now, Medicare and Medicaid, are doing pretty good?

Ms. FEDER. What I said was I think that they are enormously

valuable in terms of protecting people. Relative to the private sector, they are doing, if anything, better in terms of efficiency. But

I think we need to improve everybody.

Mr. DESJARLAIS. OK, that is a good point. You think it is doing

better than the private sector.

Ms. FEDER. In terms of its per capita rates of health.

Mr. DESJARLAIS. Do you know, prior to the implementation of

Obamacare, approximately what percentage of Americans rated

their health care as good or excellent?

Ms. FEDER. I would have to check.

Mr. DESJARLAIS. It is about 75 percent.

How many people was the Affordable Care Act or Obamacare

supposed to cover? What was uncovered?

Ms. FEDER. The Congressional Budget Office says that it will expand coverage by over 30 million people.

Mr. DESJARLAIS. OK. You said that 19 million would go in the

exchange?

Ms. FEDER. Nineteen million in the exchanges receiving credit.

Mr. DESJARLAIS. And another 16 million would go on Medicaid?

Ms. FEDER. Yes.

Mr. DESJARLAIS. If you break that down, I guess my math is correct, that is about 35 million people that you are saying are uncovered right now?

Ms. FEDER. I am saying that the Congressional Budget Office

says these will be additional people who will receive coverage, the

expansion of coverage.

Mr. DESJARLAIS. Well, the fact that we are having this hearing

today about waivers makes me feel that maybe the health care act

itself was flawed and now we are trying to find a way to make it

look better.

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I guess I have grave concerns about the systems right now. In

fact, we are about to go vote on a way to keep the country running

because, as we all know, we are broke and our deficits are increasing at remarkable rates. Yet somehow we think that we are going

to add people to a health care system, decrease cost, and increase

quality.

Do you really believe that with increasing health care costs?

Ms. FEDER. What I would say—only reiterating what the Congressional Budget Office found—is that the law is fully paid for,

that it actually slows the growth in Medicare spending, and that

it covers people at the same time. I think that is the right thing

to do.

Mr. DESJARLAIS. Mr. Haislmaier, you haven’t had a chance to

talk much here. Do you have an opinion on any of that?

Mr. HAISLMAIER. All of the foregoing is not true, I suppose. Look,

the hearing really is not about health policy but about this waiver

process. I could debate with Dr. Feder some of her comments all

day.

I just want to make it really clear for the committee that there

is no mention of a waiver in that portion of the law as Congressman Cummings cited. In fact, the preamble to the sentence, Congressman, is ‘‘In defining the term restricted annual limit for purposes of the preceding sentence, the Secretary shall ensure that access to needed services is made available with a minimal impact

on premiums.’’ So the instruction to the Secretary in the statute is

purely to define the term restricted annual limit. It doesn’t even

contemplate a phase-in.

Mr. Larsen, Mr. Davis, and some of the other Members had

made the comment that this was intended to phaseout. It may

have been. If it was, we don’t know. The reason we don’t know is

that there is nothing beyond the statute to give any indication of

congressional intent. This was added later in the Senate version of

the bill. There were no hearings on this. Whether it was or wasn’t

intended, there is no phaseout in here. There is no waiver.

Finally, Mr. DesJarlais, I could direct your attention to one of my

footnotes in my paper. I cited that, in contrast, I found 21 subsections of this legislation, PPACA, where there is explicit new, not

existing, waiver authority. There are many more that refer to existing waiver authority, but explicit new waiver authority was deliberately granted by Congress to the Secretary of HHS. That is in 21

separate other sections. And there are more instances because in

some sections waiver authority was granted in more than one place

and there were also examples where waiver authority was granted

to other departments outside HHS.

My point is simply that if Congress had intended for this to be

a phase in, it should have said so. If they intended for it to be a

waiver, they should have said so. They did neither. HHS has exceeded its authority, regardless of what one thinks of the policy. I

have offered how you could either abolish mini-meds tomorrow or

you could wait until 2014. I point in my testimony that there are

three different ways to do it.

Thank you.

Mr. GOWDY. Thank you.

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Given the fact that the bell is sounding, we will recess for votes

and we will reconvene as quickly as we can all reassemble. Thank

you.

[Recess.]

Mr. GOWDY. The committee will come to order.

I thank everyone for their indulgence as we went to vote.

At this point, the Chair will recognize the gentlelady from the

District of Columbia, Ms. Holmes Norton, for her 5 minutes.

Ms. NORTON. Thank you, Mr. Chairman.

Mr. Larsen, ladies and gentlemen, this hearing might have been

called Damned if You Do and Damned if You Don’t.

I want to congratulate you on the 30-day turnaround period for

the waivers.

I was interested in the 94 percent acceptance of waivers. That

seemed a high number. How can you explain that number?

Mr. LARSEN. We have a number of criteria by which we review

the applications that come in. The vast majority of the applicants

are able to satisfy the criteria that we have laid out in our regulations and our guidance.

Again, I think it reflects a point I made earlier that the goal of

the waiver process is to ensure that employees that have this type

of coverage are able to maintain it.

So the high approval rate reflects the criteria that we apply and

the desire to maintain coverage.

Ms. NORTON. So we don’t have people left without coverage as we

convert from one system, or non-system, to another?

Mr. LARSEN. That is correct.

Ms. NORTON. The notion of transparency is a serious charge. So

far, from what I have heard in this hearing, it strikes me that it

is a bogus charge. But the way to show that would be to have you

walk me through the process, so let us start when this bill was

passed. We are coming upon the anniversary; I think it was March

23rd or something of that time.

Now, under the APA, of course, there has to be notice and comment. So the test of transparency is what does the public know.

What does the general public, including those who are most affected on either side, what does the general public know?

You had to go into the Federal Register. When did you go into

the Federal Register?

Mr. LARSEN. We issued an interim final rule with a request for

comments in June 2010.

Ms. NORTON. So this bill is passed in March and within 3 months

you are in the Federal Register?

Mr. LARSEN. That is correct.

Ms. NORTON. So people have almost immediate notice that they

can avoid gaps in coverage.

Now, let us go further to test the charge of lack of transparency.

Did you publish any guidance documents that would inform someone who wanted to apply of how to apply?

Mr. LARSEN. We did. We issued the first guidance in September.

I think it was September 3rd or 4th, 2010, within 90 days of the

issuance of the interim final rule. Subsequent to that we issued

guidance in November further clarifying the criteria that we had

been applying. Then in December, we issued two additional guidVerDate 11-MAY-2000 15:25 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00081 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67370.TXT KATIE PsN: KATIE
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ance documents on issues relating to disclosure, the new sales of

mini-meds, and the like.

Ms. NORTON. Did all interested parties have the opportunity to

submit comments? Were there any complaints that you didn’t keep

the comment period open long enough?

Mr. LARSEN. In fact, the guidance that we issued were in many

cases in response to comments and concerns that we received. We

reacted to those and would issue guidance in response to the feedback we got from the public or employers.

Ms. NORTON. Did you make adjustments based upon the feedback? How would you characterize what effect the comments from

the public had on the final regulation?

Mr. LARSEN. One example of that is that there is concern over

whether people know for example, that their mini-med policies

have annual limits when we grant a waiver. So, for example, some

of the consumer groups wanted to make sure that people who had

these policies were given notice that their policies had limited benefits. So, for example, in the guidance that we issued in the fall,

we indicated that people who receive waivers should make sure

that they are providing disclosure to people who are covered under

these policies.

That is a good example of how we got input about public disclosure of these and then we put guidance out reflecting that input.

Ms. NORTON. Thank you, Mr. Chairman.

Mr. Chairman, I just want to say as I open my round of questioning I think that what the witness has just carried us through indicates that, whatever problems you have with the health care bill,

it is a completely bogus charge to allege that there was no transparency in this process.

I thank you.

Mr. GOWDY. I thank the gentlelady.

The Chair would now recognize the gentleman from Illinois, Mr.

Walsh.

Mr. WALSH. Thank you, Mr. Chairman.

Mr. Haislmaier, I know I butchered your name and I apologize.

Let me have at what my colleague on the other side just mentioned. This issue of transparency, is that a bogus charge as far as

you are concerned?

Mr. HAISLMAIER. I really can’t speak as much to that issue. I

think maybe some of the others on the panel, maybe Mr. Wold,

could because I am not an applicant for a waiver. I haven’t been

through the process.

Mr. WALSH. Thank you.

Let me quickly go to you, Mr. Wold. Just opine. Is that a bogus

charge, the transparency?

Mr. WOLD. That is a tough question. I think as a benefits attorney the transparency means something different to me than to

maybe an employer who sponsors one of these plans, given the fact

that I have access to information and have resources that aren’t

generally used by employers. So, from my perspective, we were able

to follow the different pieces of guidance. Some of our clients had

not heard anything about it until we informed them about it.

Mr. WALSH. Mr. Larsen, according to the HHS Annual Limits

Review and Evaluation Standard Operating Procedures, HHS emVerDate 11-MAY-2000 15:25 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00082 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67370.TXT KATIE PsN: KATIE
79

ployees must specifically look for whether applicants are unions.

No similar consideration is made for small businesses. In fact,

unions are provided two special criteria for flexibility, criteria not

given to other hourly wage employer groups such as restaurants,

the retail industry, or seasonal workers.

Does Obamacare provide special consideration for unions and not

for small businesses?

Mr. LARSEN. We, in implementing the waiver process, do not provide any special treatment for any particular type of applicant or

applicants from a particular sector in administering the program.

Mr. WALSH. Why were HHS employees instructed to specifically

look for whether applicants are unions?

Mr. LARSEN. I don’t recall that the standard operating procedures describe it in that way. It may just be because we categorize

whether they are Taft-Hartley plans or whether they are self-insured plans.

We categorize the type of applicant but if someone is categorized

as Taft-Hartley, self-insured, or a union plan, they don’t get any

different treatment. There are no different criteria applied to them.

Mr. WALSH. Mr. Haislmaier, do you have a thought on that

issue?

Mr. HAISLMAIER. Yes, it is a little far afield but it is an interesting question. Well, it is not far afield. It is tangential but it is an

interesting question.

This particular statute is part of what is known as Title 27 of

the Public Health Service Act, which was originally put in as part

of the Health Insurance Portability and Accountability Act of 1996.

There is the question of regulating insurers and the question of

regulating employer plans. What is interesting about this is that

under prior law, HIPAA, ERISA, COBRA, etc., this regulation of

whether an employer plan passes muster would have been the Department of Labor. In fact, if you look at these regulations, they

are jointly issued, as were the HIPAA regulations. Any of these

Title 27s are because of the joint jurisdiction by HHS, Labor, and

Treasury.

The interesting question to me is how in that process the administration suddenly decides that now HHS is going to regulate employee benefit plans.

Mr. WALSH. How do you think that——

Mr. HAISLMAIER. I don’t know, but it is an interesting kind of jurisdictional question that you might want to look into.

I mean, I know the people at the Employee Benefits Security Administration over at Labor. I have worked with them in the past.

That is traditionally where this kind of thing would go. Mr.

Larsen’s answer that you have these different kinds of plans—

there is the multi-employer, Taft-Hartley, union, trust—these are

things that agency at Labor deals with all the time.

Somehow in this jointly issued regulation several things happened that are to me quite surprising. One, they took what was

Congress’ instruction to define a term, meaning to set a number,

and they turned it into three numbers over 3 years, an escalation.

Suddenly we are talking about a phaseout, which isn’t in the statute. They then instituted a waiver process from that phaseout,

which again, as I pointed out, is not authorized in the statute in

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spite of Congress’ explicitly authorizing a waiver process in 21

other places in the statue. Now they have put the enforcement of

the regulation not just on insurers but on employer plans with Mr.

Larsen and HHS, which is just contrary to the normal practice that

we have had in the past in this area of law.

So I don’t know why.

Mr. WALSH. Thank you.

Mr. Chairman, I yield back.

Mr. GOWDY. Thank you, Mr. Walsh.

The Chair would now recognize the chairman of the full committee, the gentleman from California, Mr. Issa.

Chairman ISSA. Thank you, Mr. Chairman.

Mr. Larsen, I am still a little baffled about this question. If it

doesn’t matter if somebody is unionized or not, why would you put

out an SOP to recognize whether they are covered under a union

contract? What is the purpose?

Mr. LARSEN. The purpose in setting out the categories is that depending on the applicant, for example, if an insured plan applies,

you have premiums that are associated with the coverage. If you

have, for example, a self-insured plan or in some cases a collectively bargained plan, you will have premium equivalents.

Chairman ISSA. In Obamacare, as a matter of law, is that specified?

Mr. LARSEN. I am sorry, what is your question?

Chairman ISSA. Well, I hear all of that. But the fact is that if

you put into a waiver authority the information, then we have to

presume the information was seen. If the information was seen, it

can have an effect on granting or not granting, right?

Mr. LARSEN. I wouldn’t say that is true. In the case of unions——

Chairman ISSA. But the people who are approving waivers know

who they are approving and they know what their category is,

right?

Mr. LARSEN. They are aware of how the plans are categorized

but it doesn’t impact how they review the applications.

Chairman ISSA. Let me ask a broader question. With all due respect, aren’t we disenfranchising smaller businesses by granting

waivers, which inherently are to those who are smart enough and

can afford to come and do it?

Mr. Haislmaier, don’t we inherently have in this very application

process not only things which are extra or outside the legislation

and therefore not lawful to be done by the administration, and if

they need to do it they need to come back for the authority, which

they haven’t sought, but don’t we also have a situation in which

we are inherently disenfranchising the vast majority who do not

have a financial capability of coming and asking for waivers because the cost of going through the waiver process would be greater

than the savings?

Mr. HAISLMAIER. Mr. Chairman, I did in my prepared testimony

address that at the end. There is a legal question, as we both

talked about, as to whether the Department actually has the authority.

But yes, there is this policy question of this kind of a waiver

process in this or other circumstances. Rather than drawing a line

that anybody can look up to see which side of the line they are on,

81

you are saying come ask us and maybe we will let you know. Yes,

that will have at least the perception, if not the reality, of tending

to favor those who are larger and better resourced than those who

are smaller, less aware, and less resourced.

Chairman ISSA. Doesn’t this committee and the Congress have

an obligation under equal protection to find out who the

disenfranchised are and see that they are given equal opportunity?

That is what public service announcements are all about, trying to

inform the public.

Do any of you know of any effort by the administration to inform

the employer public or the insurance public that they can receive

these waivers and to make the cost of doing it de minimis? Is there

any program of that sort?

Mr. LARSEN. As I testified earlier, we put out the bulletins.——

Chairman ISSA. A bulletin? I am an employer, where would I

have read that bulletin?

Mr. LARSEN. What we found is that 30 percent of the applicants

that we processed were small businesses. They had 100 enrollees.

Chairman ISSA. Where did they find out about this?

Mr. LARSEN. We didn’t ask them how. I would guess the point

is that they were able——

Chairman ISSA. Oh, come on. You advertise and then you didn’t

ask how? I have never seen anyone come in that didn’t ask how

people found out about their program.

So how do gauge the effectiveness of your advertising? Put in another way, how do you gauge the effectiveness of spending the taxpayers’ money?

Mr. LARSEN. We are always open to suggestions for getting the

word out.

Chairman ISSA. No, no. I am asking how do you do it.

Mr. LARSEN. How do we do what, sir?

Chairman ISSA. Look, Obamacare is an abysmal failure and people are being hurt out there by rising health costs. Then there is

a waiver program that seems to select winners and losers fairly arbitrarily. How do you defend that process? More importantly, how

do you know you are effectively reaching out to all of those who

could be entitled to the lottery of opting out or not?

Mr. LARSEN. Well, it is a good process. We have 30 percent in

small businesses that are approved. We are able to maintain coverage for over two million people.

Chairman ISSA. What percentage of the American public has

been approved? These waivers, what do they represent in the percentage of insured America that is not waivered out?

Mr. LARSEN. I do know that these waivers account for about 2

percent, a very small percentage, of those who have employer-based

coverage.

Chairman ISSA. OK, so is there anybody else here who sees a

problem with 2 percent opting out on a program that, in fact, is not

ready for prime time?

[Speaker off mic.]

Chairman ISSA. That is a rhetorical question.

I am astounded that we are having a hearing and every answer

is we don’t know, we will check into it, we think the process was

fair, we don’t have answers to that, or we don’t think that is true.

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I simply have one closing question. If only 2 percent have it and

if there is no affirmative plan to enable small businesses, of which

I have some, to avail themselves of it, then how can we feel that

it is being done fairly for the 2 percent that are getting to opt out,

a great many of which are, if you will, the already advantaged

groups of society?

Mr. HAISLMAIER. I would say that is exactly the kind of problem

that this sort of situation creates. It is difficult for anyone, Mr.

Larsen or anyone else enforcing this, to counter the perception that

this is not the rule of law but that this is actually the rule of who

you know. That is why the whole mechanism, no matter how fairly

or how generously one attempts to administer it, the entire mechanism is suspect in my view because of that.

Chairman ISSA. Thank you.

Mr. Chairman, thank you for shedding light on this problem of

the 2 percent versus the rest of America.

Mr. GOWDY. Thank you, Mr. Chairman.

Members will have 5 legislative days to insert comments for the

record.

On behalf of everyone on the subcommittee and those who are

not on the subcommittee but on the full committee that were gracious enough to join us, I want thank you for your time and your

collegiality and professionalism in answering the questions.

The committee stands adjourned.

[Whereupon, at 4:05 p.m., the subcommittee was adjourned.]

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