U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Publishing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

22–147 2017

RISING HEALTH INSURANCE PREMIUMS 

UNDER OBAMACARE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JUNE 24, 2015

Serial No. 114–OS05 

Printed for the use of the Committee on Ways and Means 

( 


joloto on DSKB35BYQ1 with HEARING
ii 

COMMITTEE ON WAYS AND MEANS 

PAUL RYAN, Wisconsin, Chairman 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

ROBERT J. DOLD, Illinois 

SANDER M. LEVIN, Michigan, 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

JOYCE MYER, Staff Director 

JANICE MAYS, Minority Chief Counsel and Staff Director 

SUBCOMMITTEE ON OVERSIGHT 

PETER J. ROSKAM, Illinois, Chairman 

MIKE KELLY, Pennsylvania 

PAT MEEHAN, Pennsylvania 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

KRISTI NOEM, South Dakota 

JIM RENACCI, Ohio 

JOHN LEWIS, Georgia, 

JOSEPH CROWLEY, New York 

CHARLES B. RANGEL, New York 

LLOYD DOGGETT, Texas 


joloto on DSKB35BYQ1 with HEARING
iii 

C O N T E N T S 

Page 

Advisory of June 24, 2015 announcing the hearing .............................................. 2 

WITNESSES 

Seth Chandler, Insurance Law Professor, University of Houston ....................... 10 

Mike Kreidler, Commissioner, Washington State Insurance ............................... 31 

Julie McPeak, Commissioner, Tennessee Department of Commerce & Insurance ....................................................................................................................... 39 

Al Redmer Jr., Maryland Insurance Administration, Commissioner .................. 49 

SUBMISSION FOR THE RECORD 

AHIP, statement ...................................................................................................... 79 


joloto on DSKB35BYQ1 with HEARING

joloto on DSKB35BYQ1 with HEARING
(1) 

RISING HEALTH INSURANCE PREMIUMS 

UNDER OBAMACARE 

WEDNESDAY, JUNE 24, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON OVERSIGHT, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:04 a.m., in Room 

1100, Longworth House Office Building, the Honorable Peter Roskam [chairman of the subcommittee] presiding. 

[The advisory announcing the hearing follows:] 


joloto on DSKB35BYQ1 with HEARING
2 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.001
3 

f 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.002
4 

Chairman ROSKAM. The committee will come to order. Before 

we begin, I would like to take a point of personal privilege and acknowledge the ranking member, Mr. Lewis. You know, it is often 

said that people look at the United States Congress today and they 

can be pretty discouraged and pretty overwhelmed by what happens up here. And I began to reflect on that a little bit, and I have 

been, for the past several months, sitting next to a man who brings 

everything that is good about this process to the forefront, and that 

is John Lewis. And when I took over the gavel of this subcommittee, I knew he was the ranking member, and I knew he had 

an autobiography, and I read it, and I was fascinated by it. The 

part that fascinated me, oftentimes I put myself into the place of 

someone about whom I am reading in terms of time and place. 

And I began to think and read about what John Lewis did in the 

summer of 1961, that is he took on an incredible physical and 

moral challenge to be one of the original Freedom Riders who was 

to integrate the interstate bus system and all of those things 

around it. 

I was thinking, what was I doing in the summer of 1961? In the 

summer of 1961 I was comfortably in my mother’s womb to be born 

later on in September of that year. And as I thought about it, and 

I had planned to do this before the events of Charleston, and now 

the events of Charleston have come upon us, and as I thought 

about it, I thought what a privilege to sit on a dais with somebody 

who worked so hard to improve the world for all of us, because we 

are all better off, every one of us, regardless of our racial background, we are all better off today because of the work and the tenacity and moral clarity and the courage in light of physical trauma that John Lewis, as a very young man, was willing to endure. 

And so, we have a copy for every member, Walking With the Wind, a memoir of the movement by John Lewis. 

I would even go so far as to say I bet you if you give him eye 

contact and corner him, he will even sign the book for you. I really, 

recommend it to you, because it is a work that is an inspiration, 

it is a work that I think can guide us all. And it is an invitation 

basically to come with a sense of clarity to say look, we can take 

on these things. If John Lewis was able to be a part of taking on 

a very broken and dangerous system that was legal segregation in 

the United States and was able to persevere through that, then 

surely we can take on and deal with a number of the challenges 

that are here before us. 

And so, I am so deeply appreciative of his leadership and his 

clarity, and I am very anxious for my colleagues to read this. 

Now, since you don’t get a copy of your own book, I have got a 

gift for you, and that is this, my wife Elizabeth is an oil painter, 

and she has painted a series of paintings, and this is has not yet 

been published or put out anywhere, but one the paintings she has 

done is called Dreams of Freedom, and Dreams of Freedom is a 

portrayal of Martin Luther King, Jr.’s speech in 1963, and I note 

Mr. Lewis was there, I know he was inextricably linked to that 

time that was so pivotal in our history, the march of 1963. And so 

I present this print to you of Elizabeth Roskam’s oil painting, 

Dreams of Freedom for you. And I hope that you will accept it with 

the spirit with which it is presented to you today, Mr. Lewis. 


joloto on DSKB35BYQ1 with HEARING
5 

[Applause.] 

Mr. LEWIS. Mr. Chairman, thank you so much for those kind 

words. Thank you for making Walking With the Wind available to 

our colleagues. I thank you and your wife for this lovely, beautiful 

painting of freedom, portraying Dr. Martin Luther King, Jr. standing at the Lincoln Memorial delivering that speech. I was there, I 

was there, 23 years old, had all of my hair and a few pounds lighter. I spoke number six and Dr. King spoke number 10. And out of 

the 10 people who spoke that day, I am the only one still around. 

Thank you for your friendship, thank you for being you and I will 

cherish this. With debate, I will have an executive session with myself, whether put it in my office or take it to my house. Just thank 

you so much. 

Chairman ROSKAM. Thank you, thank you. I should show the 

audience the print. How is that? 

Mr. LEWIS. It is beautiful. 

Chairman ROSKAM. There you go. 

Well, let’s get down to business, shall we? Today’s hearing we are 

going to focus in on this discussion about big premium hikes that 

insurance companies are currently proposing for 2016 under the 

Affordable Care Act. For 5 years, the administration has insisted 

the law would reduce health care costs. The President said that we 

can cut the average family’s premium by $2,500 per year and yet 

the nonpartisan fact checker, PolitiFact, called that a broken promise. President Obama pledged that insurance premiums would go 

down, and yet The Washington Post fact checker rated that it as 

a three Pinocchios. In fact, we are 5 years in, the health insurance 

costs under ObamaCare are not going down, they are going up. 

Under the House rules the subcommittee’s job is to evaluate the 

application, execution and effectiveness of the Federal laws. Today 

we are going to do that. 

For the first time since the ACA became law, insurers are able 

to look at a full year’s worth of data claims to calculate premium 

prices for the year ahead. That is an important distinction. So we 

have real data to talk about. The proposed premium hikes tell us 

a lot about how much healthcare costs last year and what insurers 

calculate healthcare costs are going to be next year. On June 1, 

CMS made public proposed premium hikes of 10 percent or more 

for the 2016 plan year, and many of the proposed increases are eyepoppingly huge. 

In Maryland, Care First Blue Choice, which covers approximately 80 percent of the individual market has asked for an average increase of nearly 30 percent. In Missouri, Coventry Health has 

requested an increase of over 22 percent. In North Carolina, Blue 

Cross Blue Shield has asked for an increase of over 25 percent. In 

Tennessee, Blue Cross Blue Shield has asked for over 36 percent. 

In South Dakota one of the largest insurers, Wellmark has asked 

for premium hikes between 24 and 51 percent. 

It is noteworthy in many States, the largest insurers are also the 

ones proposing the biggest increases, which is especially troubling 

if you think about it, because they have got the most data and are 

likely the most accurate. We could go on, but there are a number 

of these prices that have real consequences in the lives of real people. In other words, this isn’t just about insurance commissioners 


joloto on DSKB35BYQ1 with HEARING
6 

and scholars, this is about what people are actually paying, and 

they are paying this in the context of a false narrative, and the 

false narrative, in my opinion, was this is going to be great, your 

costs are going to come down and you are going to love it. 

So here is a question, how many of Representative’s Noem’s constituents in South Dakota have gotten a 50 percent wage increase? 

I would venture very, very few in order to pay for those. Now, to 

be fair, these are just proposals, nothing has been finalized yet. In 

36 States, State insurance authorities must approve the increases, 

and often after negotiating with the insurers, but there is a reason 

that the insurers are asking for such big rate hikes, the Affordable 

Care Act isn’t working to lower costs, it is actually driving them 

up in many circumstances. 

President Obama said that under the ACA more people will have 

health insurance so that the costly emergency care would diminish. 

But in order to keep costs down, these plans have relied on narrower provider networks, meaning fewer doctors and limited availability. Also, much of the new law’s health insurance coverage 

came in the form of expanding Medicaid. 

As many individuals can’t get in to see their doctors and many 

doctors aren’t taking Medicaid patients, the net result is that the 

ACA is ironically driving the number of emergency room visits up. 

Just the opposite of what President said and hoped would be 

achieved. 

Are these effects of the ACA just growing pains? Hmm, I don’t 

think so. The law created a number of temporary programs to bail 

out billions in taxpayer funds during the first few years to lower 

the costs seen by individuals and to protect the insurance carriers 

against financial losses, but those programs are beginning to phase 

out. As the government is slowly taking off the training wheels, the 

Affordable Care Act is looking pretty wobbly. 

Even with the billions and billions of taxpayer dollars sent to reduce the sticker price of insurance for individuals to lower their 

out-of-pocket costs, to pump up big insurance companies, to establish and operate the insurance market places and more, all hidden 

and shifted costs paid by the taxpayer, even with all that, 

healthcare costs and health insurance premiums are still going up. 

On its Web site, the Department of Health and Human Services 

says this: A new wave of powerful evidence points to one clear conclusion, the Affordable Care Act is working to make health care 

more affordable, accessible and of higher quality for families, seniors, businesses and taxpayers alike. But look at the facts, premiums are going up, emergency room use is rising, co-ops are failing and there is certainly a new wave of evidence, I would argue, 

and that is one that is pointing in a different direction, and that 

is, that the Affordable Care Act or Obama care is not working as 

promised. 

We are going to have a robust discussion in a couple of minutes; 

we will introduce our witnesses. But for now I would like to recognize Mr. Lewis for his opening statement. 

Mr. LEWIS. Good morning. Mr. Chairman, I want to thank you 

for holding today’s hearing on the Affordable Care Act. I would also 

would like to thank our witnesses for being here. We are always 

pleased to discuss our landmark health law. 


joloto on DSKB35BYQ1 with HEARING
7 

I will begin by saying that I have said at countless other hearings, the law works. The ACA is the law of the land. It was the 

right thing to do, it was the just thing to do, and it was long overdue. 

I believe in my core that health care is a basic human right, it 

should not be reserved for a select few, for the rich or for the 

wealthy. Each and every one of us must do all we can to make this 

country better for the least among us, and for generations yet unborn. We have a duty to speak up and speak out on behalf of people who have no one to stand up for them. The Affordable Care Act 

responded to the desperation of countless Americans who have a 

need, a right to health care. 

The law provides real benefits to American families. Today, over 

16 million people who did not have coverage now do. More than 

100 million people with existing health conditions can no longer be 

denied coverage. Millions of young people can now stay on their 

parents’ insurance plan until age 26. And over 9 million hardworking Americans have received tax credits to make health insurance affordable, just as Congress intended. 

During today’s hearing, I would like to learn more about how 

premiums are being set for next year. Many have heard or read 

stories in the press, but these stories may overlook future rate cuts, 

and instead, focus on proposal and still must be reviewed under the 

law. Although these rates are not yet final, I look forward to hearing more from our witnesses about what they think the final rates 

would be. 

Again, Mr. Chairman, I would like to thank you for holding today’s hearing. Thank you very much and I yield back. 

Chairman ROSKAM. Thank you, Mr. Lewis. We will hear from 

our four witnesses, two of whom I will introduce, and two of whom 

will be introduced by members of the panel. Our first witness is Al 

Redmer, Jr., who is the commissioner of Maryland Insurance Administration. He will testify about the cost of health plans within 

the State of Maryland and the experiences with Maryland’s Statebased exchange. Then we also have Seth Chandler, an insurance 

professor at the University of Houston who will testify about contributing factors regarding the premium spike. 

And I would like to recognize Mrs. Black to make an introduction. 

Mrs. BLACK. Thank you, Mr. Chairman. I want to thank you for 

allowing me to be here with you on committee as a noncommittee 

member. I am very proud today to introduce the commissioner of 

my State, Julie McPeak, and she is Commissioner of Tennessee’s 

Department of Commerce and Insurance. She serves in this role 

under Governor Haslam, our current Governor. She has been doing 

so since 2011, and she brings 15 years of experience with her in 

the legal and administrative experience in State government. 

I am also proud, extremely proud to tell you that she has been 

commissioner of commerce and insurance in two different States 

before coming to the State of Tennessee. She was the commissioner 

there in Kentucky and she is the first woman in the country who 

has had this title of being able to serve in two different States in 

this position. 


joloto on DSKB35BYQ1 with HEARING
8 

I really appreciate her dedication to our State. She has done a 

great job. She is committed to the State, and we have the most robust competitive insurance market possible here under the current 

law. I look forward to hearing her testimony today as she talks 

about the impact of ACA, in particular, on my State’s insurance 

marketplace, specifically on the premiums and also the laws and 

impact on our enrollees, so it is my pleasure to have her with us 

here today. 

Chairman ROSKAM. Thank you. And Dr. McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. It is my pleasure 

to introduce my colleague Mike Kreidler. Mike before he got involved in politics was an optometrist, he could see clearly. He 

worked for 20 years for a group held cooperative in Washington 

State so he understands managed care and has been very deeply 

involved in that on a personal, professional level. 

I got to know Mike when I was in the State legislature, he was 

there in the 1970s onward, and then came for a very short stay in 

the United States Congress. He was here 2 years and fate and the 

tides of war took him home again, but he kept up his public service 

by becoming the insurance commissioner of the State of Washington and has been such for—I have if forgotten how many years 

it has been—but it has got to be 15 by now, isn’t it? He is a very 

knowledgeable man and I commend him to the committee. He 

knows about both on the doing side as well as the public policy 

side. 

Chairman ROSKAM. Thank you. For our witnesses, your written 

statements are part of the record. You have got 5 minutes, so Mr. 

Chandler, we welcome the opportunity to hear from you. You get 

the joke on this, green, yellow, red, there is a light that will be fairly intuitive. And if I have to explain that to you, it is hopeless. 

STATEMENT OF SETH CHANDLER, INSURANCE LAW 

PROFESSOR, UNIVERSITY OF HOUSTON 

Mr. CHANDLER. Thank you very much. My name is Seth Chandler, I am a law professor at the University of Houston with specialization in insurance law and healthcare law. I do a lot of work 

using mathematics to enhance legal analysis. I am here today to 

testify on some of the anticipated premium increases and their 

sources on the exchanges for 2016 with an emphasis on two of the 

famous three Rs. 

Point one, we need to be careful in looking at premium increases. 

There are many occasions on which the net premium increase actually seen by an insured, which I think is the most important thing, 

will be considerably higher than the gross premium increase. A fact 

likely to diminish individual choice, and induce policyholders to 

purchase lower cost, silver HMO policies. 

Second, the phaseout of transitional reinsurance and the CR/Omnibus alteration of risk corridors is unlikely, in most cases, to play 

a large role for any particularly large premium increases for 2016. 

Third, the major source of increases is likely to be higher than 

expected claims for insureds, particularly in the more generous 

platinum, and gold, and PPO plans. 

Now for some details. Net premiums, the amount paid after lawful subsidies are taken into account, not the published gross preVerDate Sep 11 2014 12:58 Feb 14, 2017 Jkt 022147 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\22147.XXX 22147

joloto on DSKB35BYQ1 with HEARING
9 

miums are what matters to most people. And as I show in my technical appendix, it is a matter of indisputable mathematics that net 

premium increases under the ACA are not, not, not the same as 

gross premium increases. This fact can convert a 10 percent gross 

premium increase into a 15 percent net premium increase; it can 

convert a 10 percent gross into 12 percent net premium increase 

in a way that may impel the purchaser to experience a 50 percent 

increase in out-of-pocket costs. 

People on both sides of the aisle take note. The poor bear the 

brunt of this math. The more heavily subsidized you are, the higher the percentage price increase if you want continuity of insurers 

or continuity of care. 

Based on the actuarial value continuance tables created by CMS 

for its regulation of the Affordable Care Act, I have computed the 

reduction in net claims expenses created by the Transitional Reinsurance Programs for 2014, 2015, 2016. The TRP, as retroactively 

modified last week, reduced insurer’s exchange expenses by 14 to 

16 percent in 2014, depending on the metal level. By the way, prior 

to the change last week, the figures were 11 to 12 percent, meaning 

that insurers large and small just received a 3 percent cash back 

rebate from the Federal Government for 2014. 

For 2015, the TRP should reduce insurers’ net claims expenses 

by 3 to 4 percent, and for 2016, the figures are almost the same. 

Since the value of the subsidies have not declined substantially between 2015 and 2016, it is difficult to attribute a substantial part 

of the premium increases for 2016 to the phaseout. 

Now, another source of premium increases for 2016, sometimes 

mentioned is the modification of the risk corridors program by the 

CR/Omnibus bill. I did some research and it looks like that is unlikely, again, to be a source of a significant change in premiums. 

Yes, it is true that insurers may only received 37 percent or so of 

what they had hoped to receive under CR/Omnibus, but many insurers hope that they will actually make a profit under the Affordable Care Act. 

And, therefore, the big picture is, it is unlikely that when we are 

looking at particularly large increases, the source of those increases 

is the phaseout of the transitional reinsurance program or of the 

alteration of risk corridors. Instead, let’s look at what is going on 

here. Standard & Poor’s has suggested that most insurers lost 

money in 2014, and so it is natural to see them requesting a rate 

increase. But don’t trust the insurers, look it the Obama administration’s actuarial value calculator which it is used to regulate insurers to determine if they are providing value. If you look at that, 

it shows that the gross claims of insurers is going to go up by 13 

to 14 percent in 2016, relative to 2017. 

Let me just conclude by saying that the ACA focused mostly on 

insurance markets. And in the absence of better medical cost control, one should everything else hold equal, expect the Federal bills 

for subsidies to increase. Moreover, it is likely to cause an escalation of premiums, particularly for the more generation PPO plans 

and gold and platinum plans. And if so, we will see a diminishing 

choice of physicians, potentially less continuity of care, and increased cost sharing for many individuals. 


joloto on DSKB35BYQ1 with HEARING
10 

Obviously, I am speaking here before King v. Burwell is decided. 

A decision adverse to the Obama administration would not change 

the concepts I am laying out, but it would change the numbers. In 

fact, one of the most interesting things is to think about what happens to the transitional reinsurance program if we have gridlock 

both at the Federal level and the States. But if King v. Burwell is 

decided adversely to the Obama administration, you folks have a 

lot more issues to discuss. 

Thank you very much. 

[The prepared statement of Mr. Chandler follows:] 


joloto on DSKB35BYQ1 with HEARING
11 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.003
12 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.004
13 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.005
14 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.006
15 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.007
16 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.008
17 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.009
18 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.010
19 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.011
20 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.012
21 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.013
22 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.014
23 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.015
24 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.016
25 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.017
26 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.018
27 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.019
28 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.020
29 

f 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.021
30 

Chairman ROSKAM. Mr. Kreidler. 

STATEMENT OF MIKE KREIDLER, WASHINGTON STATE 

INSURANCE COMMISSIONER 

Mr. KREIDLER. Thank you, Mr. Chairman, for the privilege to 

be here, Ranking Member Lewis, Members of the Committee. My 

name is Mike Kreidler, I am the insurance Commissioner for the 

State of Washington, elected to that position. I am the longest serving insurance commissioner in the country. And as Mr. McDermott 

pointed out, I am also a former Member of Congress too. As a provider, as an elected policy maker, and also as a health administrator, I have enjoyed working on the issues around healthcare reform. And I can be no closer to it than to be insurance commissioner at a time like this. 

As insurance commissioner for the last 14 years, I have heard 

many personal stories from individuals. One individual for the 

ACA, a women from Kent, Washington, called my office complaining about a situation where she wanted to have a child, so she 

wanted to do the responsible thing, she got health insurance. Unfortunately, when she was expecting to deliver normally, and as 

scheduled to at the end of July, had to have an emergency C section. Because it was in the 9 months, this is pre ACA, within the 

9 months, it was not covered. She complained to our office. We intervened with the health insurer and got some reduction in the bill 

that she had voluntarily by the health insurer. So she wound up 

with a very large medical bill, and that was through no fault of her 

own. 

What we saw before the ACA was that we had almost 1 million 

people in State of Washington without insurance, that was 14 percent of the State’s population. We had 11 insurers in the market, 

which was better than most States, and pretty good, but consumers 

still wanted more choices. 

We carefully reviewed the rates that came before us, but we still 

frequently looked at double-digit rate increases that we had to approve pre ACA. Many of the health plans also did not cover maternity or prescription drugs. The system was not sustainable, the cost 

for continuing to rise precipitously, and we saw the uninsured rate 

continue to rise. 

Now let’s fast forward to today. The health care reform is working in the State of Washington. We have an uninsured rate coming 

down some 40 percent, down to 8.5 percent since the Affordable 

Care went into effect. We looked at the numbers going back, and 

that is the lowest numbers that we can have tracking that goes 

back to 1987 numbers that we are looking at, and it is the lowest 

we have seen. 

Premiums are not soaring, the lowest rate request we have seen 

in decades—in fact, if you look at the plans inside the exchange 

now, if you paid the full cost with no subsidy, the average rate 

$384 a month; if you receive a subsidy, it is $174. 

This year, insurers are requesting 5.4 percent, and 3 percent of 

that is actually going to the exchange, to fund the exchange, 3 percent of the 5.4. We had 11 insurers in the market, that is pretty 

good. We now have 17 insurers and 240 plans for 2016. Consumers 

have more choices, the market is thriving. There are several things 


joloto on DSKB35BYQ1 with HEARING
31 

that we wound up doing that I think made a big difference. The 

State of Washington expanded the Medicaid program, we have 

530,000 people through Washington Apple Health. 

And the other big decision action that I took was that when the 

President offered to say if you keep your canceled policies. I said, 

no, we need to keep the one pool so you didn’t wind up with a good 

pool and a bad pool when it came to risk. And as a result of that, 

it helped to stabilize the market. So we don’t have the problems 

with legacy plans, the grandfathered plans that many other States 

have. 

Second was to create standards for narrow networks. We have 

standards in the State of Washington with network adequacy 

standards that we put into effect for 2015. In fact, we were the only 

State that wound up doing that. It is a level playing field. Insurers 

know what to expect. That is one reason why we are looking at a 

market where we have seen a significant increase in the number 

of insurers going from 11 insurers to now 17, that is a 50-percent 

increase in the number of insurers after the Affordable Care Act. 

The increases are many some of the lowest in memory. Fifty percent or more of the insurers are in the market, and the insured run 

numbers in the State of Washington continue to plummet. The Affordable Care Act in Washington is working. I believe it is working 

for the country too. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Kreidler follows:] 


joloto on DSKB35BYQ1 with HEARING
32 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.022
33 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.023
34 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.024
35 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.025
36 

f 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.026
37 

Chairman ROSKAM. Thank you. Ms. McPeak. 

STATEMENT OF JULIE McPEAK, COMMISSIONER, TENNESSEE 

DEPARTMENT OF COMMERCE & INSURANCE 

Ms. MCPEAK. Thank you. Good morning Chairman Roskam, 

Ranking Member Lewis and Members of the Subcommittee. Thank 

you for inviting me to testify before the subcommittee on the impact that the Affordable Care Act has had on health insurance premiums. And thank you, particularly Congressman Black, for your 

kind introduction. 

As mentioned, I am Julie McPeak, Commissioner of the Tennessee Department of Commerce & Insurance. I have spent most 

of my career in insurance regulation and I have a strong affinity 

for the country’s State-based system of insurance oversight. 

Tennessee has a Federally Facilitated Marketplace, FFM for 

brevity. The ACA legislation was intended to have significant impacts, and in that respect, it has definitely achieved its intent. The 

ACA introduced rating and underwriting requirements that fundamentally reshape how health insurance is priced, purchased, and 

administered. These new requirements make a comparison of pre 

ACA policies to ACA-compliant policies, a significant challenge. 

ACA requirements that are cost drivers in terms of premium prices 

are well documented, and include prohibitions on preexisting condition exclusions, guaranteed availability and issued requirements, 

and new essential health benefits benchmark plans that create a 

floor for ACA-compliant benefits. 

The ACA significantly impacted an insurer’s flexibility to design 

plans to meet consumer demands. In a post ACA world, plans 

across carriers are much more similar than they are different, and 

carriers compete primarily on name recognition, physician networks and premium price. 

The impact of the ACA on Tennessee’s consumers, its marketplace and rates, has created significant challenges and uncertainty 

across the State’s insurance landscape. Tennessee has been fortunate enough to experience consistency among the carriers offering 

policies to our residents. In the first year of the FFM, 2014, Tennessee had four carriers total writing policies, but only one offering 

policies in all 95 counties. We have received filings for 2016 that 

show five carriers writing policies, but still only two carriers offering the policy statewide. 

Outside the FFM, the ACA and its implementing regulations 

have had the effect of segmenting Tennessee’s marketplace. Socalled grandfather plans and grandmother plans, which were 

known as transitional plans, remain a large block of business 

across our State. This segmentation often creates confusion for consumers who know they have a policy with a certain insurer, but do 

not understand the block of business that includes their policy. 

Tennessee had competitive marketplace before the ACA and that 

marketplace remains competitive today. Market competition, in 

part, gave Tennessee some of the lowest price FFM products in the 

country. In 2014 and 2015, Tennessee plans have ranked in the top 

five least expensive plans when ranks based on their premiums 

price of the second lowest cost silver plan on the FFM. Having a 

competitive market, however, does not isolate Tennesseeans from 


joloto on DSKB35BYQ1 with HEARING
38 

seeing significant rate increases. Tennessee insurance carriers offering plans on the FFM requested rate increases for plan year 

2015 and 2016, from fourth-tenths of a percent to 36 percent, with 

the carriers comprising over 80 percent of the market, requesting 

increases of 32.6 percent and 36.3 percent respectively. 

TDCI is reviewing the proposed 2016 rate increases, and according to Federal guidelines, will need to improve rates by the middle 

of August. These substantial rate increases can largely be attributed to medical trends and utilization. In fact, our largest FFM 

carrier reported for calendar year 2014, a medical loss ratio of well 

over 100 percent. To put that in perspective, for every $1 in premium received, the company paid out over $1 in claims, operating 

in a net loss, not including the administrative costs of the company. 

The ACA’s strict underwriting and business requirements have left 

carriers with few options to maintain their reduce costs. 

One option that Tennessee has experienced is use of limited provider networks. The ACA also established the consumer-operated 

and oriented plan, the co-op program to help create new market 

competition. Tennessee is one of 26 States to have an operating coop, Community Health Alliance Mutual Insurance Company was 

awarded over $73 million in low-interest loans to establish itself in 

Tennessee. 

These first 2 years of operation have been challenging for CHA, 

as the company tried to assert itself in the marketplace while also 

maintaining financial capacity. 

In 2014 CHA had rates that were on the high side of the market, 

and as a result, the company failed to achieve a significant amount 

of volume. CHA revised rates for 2015 and was very competitive 

with the market. In fact, CHA grew too big too quickly and approached the Department with a proposal to freeze enrollment 

under U.S. Department of Health and Human Services guidelines. 

We agreed to the proposed freeze and worked with HHS to cease 

enrollment, thereby effectively taking CHA off the marketplace. 

The decision to freeze enrollment remains the right decision for the 

company, and most importantly, for Tennessee insurance consumers, but the process has not been as efficient as we had hoped. 

For 2016, CHA has requested an average rate increase of over 

32 percent. We continued to review the rate request as well as the 

company’s frozen status for marketplace purposes. The ACA in its 

implementation by HHS has challenged State regulators and carriers by creating and continuing consistent uncertainty. Uncertainty in the business of risk can nearly always drive up cost or 

lessens competition. In the case of the ACA, I think it has done 

both. 

In the early days of the ACA until exchanges were rolled out in 

2014, Governors, insurance regulators, and carriers looked for guidance from the Federal Government on exchange structures and 

rules. Delayed or unclear guidance lead certain carriers to sit out 

of certain marketplaces in these first few years to better understand the new market. 

I personally was told by two national carriers that this uncertainty contributed to their decision-making processes for the FFM 

and their decisions not to participate. My written testimony provides a more recent example of the HHS guidance, introducing unVerDate Sep 11 2014 12:58 Feb 14, 2017 Jkt 022147 PO 00000 Frm 00042 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\22147.XXX 22147

joloto on DSKB35BYQ1 with HEARING
39 

certainty to market, release after the carriers have submitted their 

rating proposal for 2016. 

Implementation of the ACA has been a challenge. We continue 

to review policy forms and rates for next year, but anticipate that 

Tennessee consumers will again see increased insurance costs for 

2016. Again, thank you for the opportunity to be here look forward 

to answering your questions. 

[The prepared statement of Ms. McPeak follows:] 


joloto on DSKB35BYQ1 with HEARING
40 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.027
41 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.028
42 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.029
43 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.030
44 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.031
45 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.032
46 

f 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.033
47 

Chairman ROSKAM. Thank you. Mr. Redmer. 

STATEMENT OF AL REDMER, JR., COMMISSIONER, MARYLAND 

INSURANCE ADMINISTRATION 

Mr. REDMER. Thank you, Mr. Chairman, Members of the Committee, I appreciate the opportunity to testify on proposed individual and small group rate increases in Maryland. And I especially appreciate being here on the day that you choose to give tribute to Congressman Lewis. 

As some added perspective, I have been in the health insurance 

business my entire adult life, including time as a producer, time in 

the Maryland legislature, and time as a CEO of a regional health 

insurance carrier. 

Maryland carriers were required to provide their proposed rate 

increases on May 1. We are currently going through our actuarial 

review of those proposed rate increases and will make a final determination by the end of July. 

Maryland does have a State-based exchange. In the individual 

marketplace, we are seeing a low where we see a reduction of .3 

percent by one carrier. We see an increase on the high side of a 

little over 30 percent by Care First, which is our Blue Cross/Blue 

Shield carrier, which lost a significant majority of the market 

share. It is, in part, because they lost significant money last year, 

in part, I believe due to the adverse selection of small employers 

disbanding their small group plans and those employees migrating 

into the individual marketplace. 

As a reference point, Evergreen, which is our co-op, they are 

seeking a price increase of just under 10 percent. In the small 

group market, we see a low of, again, Care First our Blue’s plan, 

asking for a reduction of a little over 16 percent. Evergreen, the coop plan, is asking for an increase of almost 15 percent, which is on 

the high side in the small group marketplace. 

For the proposed increases, what we are seeing as the cost drivers is an increase in the average morbidity as high as 15 percent; 

increased medical trend, we are seeing a low of 3.5, the highest 

point of projection is 7, with projected profit margins in the 1 to 

2 percent space. 

In 2016, we will see another year of uncertainty in the marketplace, one of the unforeseen factors we just don’t know what the 

answer is, is the effect of the small group market from 50 to 100. 

As a matter of fact, Maryland increased the minimum allowable 

threshold for stop loss—minimum attachment point went from 10 

to 22.5 in an effort to minimize adverse selection by going into selffunded plans. 

In the individual market, the uncertainty in part is going to be 

the increase in the penalty, whether that is going to drive any of 

these younger folks into the insured marketplace, or if it is just 

going to be the folks who had been sick in the last year or two migrating to the guaranteed issue marketplace. 

Also, I want to bring your attention to one of the unintended consequences of the Affordable Care Act. We have no regulatory control over it, but if you go back to January of 2014, we had thousands and thousands of small groups that wanted to delay the effects of the Affordable Care Act so they chose to early renew. InVerDate Sep 11 2014 12:58 Feb 14, 2017 Jkt 022147 PO 00000 Frm 00051 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\22147.XXX 22147

joloto on DSKB35BYQ1 with HEARING
48 

stead of renewing in January, February or March of 2014, they got 

in under the wire and they renewed in November or December of 

2013. The effect of that, at least in Maryland, is we had a disproportionate amount of the marketplace, both small group plans 

and the individual marketplace renewing at the same time, and it 

is an operational nightmare for both the carriers and the producers 

to handle that amount of work at the same time. 

Also, finally, Maryland is a little unique; there hasn’t been an access issue in over 20 years. Everybody in Maryland before the Affordable Care Act had access, whether it was Medicaid for the poor 

or Medicare for the seniors. We had underwritten individual plans, 

we had guaranteed issue, guaranteed renewability with no pre X 

in the small group market for those who couldn’t get an individual 

underwritten plan, we had to State subsidize the individual high 

risk pool. So access was not an issue before the ACA. 

With that, I will be happy to answer any questions. 

[The prepared statement of Mr. Redmer follows:] 


joloto on DSKB35BYQ1 with HEARING
49 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.034
50 

f 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.035
51 

Chairman ROSKAM. Thank you all. We will start our inquiry. 

Mr. Kelly of Pennsylvania. 

Mr. KELLY. I thank the chairman. I think all of you were here 

today I really appreciate you being here and I want to make sure 

we get off on the right foot. This has nothing to do with us not having a heart and not wanting to help people who need health insurance. So I want to make sure we understand that. 

One of the things that I think that is really critical and Professor, I really appreciate your input, Mr. Redmer, thank you for 

what you are talking about. I am an automobile dealer. We just 

went through the new package for our people, it is up over 30 percent. The way we really keep it at little over 30 percent is by working with the deductible a little bit. I have got to tell you, back home 

where I am from, sustainable means capable of being sustained. I 

looked it up, because I wanted to make sure we understand. Sustainable is a method of harvesting or using a resource so that resource is not depleted or permanently damaged. 

So when we talk about these programs, as a private business 

person your model has to be sustainable or you are on a fool’s errand, you won’t be able to stay in business. So as I listen to your 

testimony, I am really interested. 

I have to tell you a little bit of what happened to me back home. 

I go to this little restaurant Natili’s in Butler, been there a long 

time. Cindy is the girl who always waits on me. A year ago, she 

says is there something you can do about health insurance. I said, 

well, what is the problem? She goes well, my husband’s firm used 

to include me, now they are not. I am shopping right now. My 

monthly cost is going to be $700 to $800, and my deductible is 

$10,000 so I can get insurance, but for all intents and purposes I 

am not insured. So having an insurance policy and actually being 

insured against out-of-pocket, or what it is actually going to defray 

for you—there is two different worlds out there. And that is why 

I appreciate you all being here, because I hear that in some cases 

it is down; in Pennsylvania it is not down, it is going up. 

But rather than talk in government terms that are too lofty and 

often leave people confused and scratching their head and say, you 

know what? I don’t get it and I will just walk away, because I know 

the government will at some point take care of it all. 

Mr. Chandler, that model that we are on right now is not sustainable, is it? From a business standpoint, the model that we on 

right now in the Affordable Care Act—first of all, it is not affordable, in a lot of ways, I am talking about people who actually have 

to buy it and pay for it. And then others that have to help invest 

in subsidies in order to make it more affordable for other people. 

So somebody has an out-of-pocket cost, nothing is for nothing. 

Your testimony, I thought it was fascinating, because I think you 

talked in real-world terms about what this means to people. Ms. 

McPeak, you are the same way, Mr. Redmer the same way. We are 

talking about everyday guys and gals who get up in the morning, 

throw their feet out over the bed, go to work, put a roof over the 

head of their kids, put food on the table, clothes on their back, prepare for the future and try to make sure that they are healthy. 

Every one of you talked in your testimony about a trajectory that 

is unsustainable. Am I missing something there or not? 


joloto on DSKB35BYQ1 with HEARING
52 

Mr. CHANDLER. In my opinion, Representative, it is very unrealistic to think that this country can afford a situation in which 17 

percent of our GDP goes to health care, and that that starts to 

keep going up and keep going up, it is estimated to go to 23 percent, okay? Think about, yes, health care is important, but we can’t 

run businesses, we can’t run a society well in which that large a 

proportion of our GDP is being diverted into health care. 

Mr. KELLY. See, our State is getting killed with this. Ms. 

McPeak and Mr. Redmer, if you could. 

Ms. MCPEAK. Thank you for your question. It is an interesting 

concept of sustainability. Certainly what concerns me are the large 

cost increases for premiums that have been requested in Tennessee. I will tell you, we as regulators test every one of the assumptions that is included in that rate request. In fact, the loss experience is there. So when you are considering a rate increase in 

the 30 percent range, and you know that that is going to affect people in your State, you really want to see if there is any margin to 

assess whether or not there is anything you can to do make that 

less uncomfortable for the residents of our State. The problem is 

under our State’s authority we have to look the rates and whether 

they are unfair discriminatory or actually insufficient. 

In some instances, with the experience that we have seen and 

have been filed in with the rate requests, even the 30 percent increases may still be deemed insufficient and we made need to order 

increases above those rates in order to protect the financial stability of the company. In that regard, I don’t think those rate increases are sustainable, because those insurers need to stay in 

business to make good on their promises that they have sold to 

every resident of our State. 

Mr. KELLY. Well, I think you are all here for the same reason. 

I think we have the same purpose. The worst thing in your life is 

to make a promise that you can’t keep. I think that somehow we 

went so far down the road on this being affordable and accessible 

that we really missed the part about it being accessible and truly 

being affordable. And my worry is the sustainability of the model 

that we have out there right now, it just doesn’t work; the President is right, do the arithmetic and you are going to find out it 

doesn’t bode well in the future. 

Thank you for being here, appreciate your testimony. 

Chairman ROSKAM. Mr. Lewis. 

Mr. LEWIS. Thank you very much, Mr. Chairman. Again, let me 

thank each of the witnesses for being here today. A good-looking 

group, beautiful, handsome. 

Commissioner Kreidler, welcome back my dear friend and colleague. Again, thank you for being here. I want to learn more 

about how people gaining Medicaid coverage help State insurance 

markets? 

Ms. KREIDLER. Say that again. 

Mr. LEWIS. I want to learn more about how people gaining Medicaid coverage help State insurance markets. 

Ms. KREIDLER. Thank you, Mr. Lewis. And the complimentary 

words that were directed to you were totally insufficient to recognize your broad achievement. So it is a pleasure to be here to have 

an opportunity to take this question. 


joloto on DSKB35BYQ1 with HEARING
53 

Its failure to expand the Medicaid program, in my opinion, has 

had very negative impacts on most States, it did not from the 

standpoint of their exchange market, whether it is—most of those 

will are going to be Federally-facilitated exchanges. By virtue of 

not expanding, you wound up with people who would have been eligible for Medicaid, either because of family members or others who 

get them into the insured market, into the exchange, and as a result, you see much higher claims experience, morbidity numbers 

from the standpoint of the exchange. It is very positive to have 

done a Medicaid expansion from the standpoint of helping to hold 

down the rate increases, you artificially push up the rates inside 

the exchange by virtue of not also moving to the Medicaid expansion simultaneously. 

Mr. LEWIS. Do you think this process that helps States that 

have not expanded Medicaid, like my home State of Georgia? 

Ms. KREIDLER. Mr. Lewis, I would say that one of the things 

that I have seen as a very positive indication is that we see a number of States now moving to—Governors moving to try to address 

the issue of Medicaid expansion. I think it is going to be growing 

recognition. When Medicaid was first adopted back in 1965, we 

wound up with at least one State, Arizona, as I recall, held out for 

a number of years, but finally wound up joining. We have many 

more States who have not made the Medicaid expansion here now. 

But I think as they look at it and start to see the effects, one on 

that the rates inside the exchange, but also the effects on their citizens who would be eligible for Medicaid who are effectively locked 

out right now. We need to do something about it. 

Mr. LEWIS. I know that Washington has a State exchange. If 

the Supreme Court were to decide against the government, will you 

please describe the possible impact on those people living in States 

with a Federal exchange? 

Ms. KREIDLER. We actually had some experience with that. Mr. 

McDermott will remember this, he was in Congress then, so he was 

away from it, but in the late 1990s, we actually had healthcare reform that had passed in 1993. It was repealed in 1995, but it left 

in place that you could get health insurance after a 3-month preexisting waiting period. What the net result was, we effectively had 

what would be left with the Affordable Care Act is you have a 

guaranteed issue, and you would wind up with the healthy people 

dropping out as rates started to rise, the sick people staying, and 

you couldn’t stick with it. 

In the State of Washington where we had a comparable situation 

in the 1990s, the market actually collapsed. We lost our individual 

market. It took legislative action to see it restored just as I came 

into office in 2001. We would see, in those 34 States that are in 

a position right now to have Federally facilitated today, in fact, 

could be in a position to see exactly what happened in the State 

of Washington, which is a collapse. This is based, of course, on the 

failure of Congress to come together with a satisfactory resolution, 

and I trust that would be the case. 

Mr. LEWIS. Again, Mr. Commissioner, thank you for being here. 

Good to see you, thank you for your leadership. 

Mr. CHANDLER. My pleasure. 

Chairman ROSKAM. Mr. Meehan of Pennsylvania. 


joloto on DSKB35BYQ1 with HEARING
54 

Mr. MEEHAN. Mr. Chairman, thank you. I thank the panelists 

for being here. Mr. Redmer, your testimony, you made a statement 

that you have seen costs generated because there has been a 15 

percent increase in morbidity. What is that? 

Mr. REDMER. That is basically—I will describe it as the health 

status of the pool is getting sicker. So they are going to be utilizing 

more services. 

Mr. MEEHAN. Okay, all right, I understand, and that is one of 

the cost drivers. 

Mr. Kreidler, we are sitting here, hearing testimony from two different places. We have got 30 percent increases on average in Tennessee. Mr. Chandler has talked about extensive increases in 

Texas. I am seeing them in Pennsylvania, and yet you are saying 

that you have half a percent increase. What is going on? 

Mr. KREIDLER. Thank you for the question. Clearly there are 

some stark differences among the States. I think part of what I 

tried to point out was that I think we were one, fortunate that we 

had a very competitive market in the State of Washington before 

the ACA came in. It has become significantly more competitive, 50 

percent more carriers in the market. Not all States have had the 

benefit of that. 

The second is—— 

Mr. MEEHAN. Your starting point, the beginning line is at a different place than other States. 

Mr. KREIDLER. Exactly, and it has had an impact in as we 

went through the process of implementing the Affordable Care Act; 

where you started made a difference. We also had a strong history 

of doing rate review, and by virtue of having a competitive market, 

we saw better rates in the State of Washington than you saw in 

any other because of a competitive market. 

Mr. MEEHAN. Well, so that is a point though, and that is, I 

think, what is lost because we don’t talk about it, it was never sold. 

If you are in this State, it is a generalization that all Americans 

will either benefit, or the costs will go down and that doesn’t seem 

to be occurring. What is the experience you are having with your 

copays and your deductibles? 

Mr. KREIDLER. Copays and deductibles, I will be frank with 

you are a bit of a challenge. 

Mr. MEEHAN. They are going up? 

Mr. KREIDLER. While you have been successful in limiting the 

total out-of-pocket expense for individuals, copays and deductibles 

have gone up. 

Mr. MEEHAN. That is capturing them on the other end. 

Ms. KREIDLER. It winds up having net effect for individuals. 

But if they get really sick, they really benefit, and it puts a limit 

on their total out-of-pocket. You want the insurance, if you really, 

really absolutely need it or you are willing to pay for some of the 

copays and deductibles before you reach the point where you 

achieve that out-of-pocket expense limit. 

Mr. MEEHAN. Let me close with Mr. Chandler and Ms. McPeak 

and Mr. Redmer if you have insights on these too. I made this 

point: generalizations that were made that the average American 

is going to save $2,500 under the plan, if you like your doctor, you 

are going to keep your doctor. Now we are seeing in Pennsylvania 


joloto on DSKB35BYQ1 with HEARING
55 

as an example, the rate increases in western Pennsylvania where 

my colleague Mr. Kelly is from, 30, as high as 40 percent on average. And networks are narrowing, not expanding. So can you explain to me what is happening in the marketplace in the aftermath 

of those promises, are we seeing the $2,500 savings an are people 

keeping their doctors or are networks getting narrower, or are narrower networks a good thing. Mr. Chandler? 

Mr. CHANDLER. I think that assertion deserved every Pinocchio 

that it received. What you are seeing is an entirely predictable result. Community-rated plans in most jurisdictions have been subject to severe adverse selection problems. And I believe we are beginning to see precisely that with the rate increases we are seeing 

here. 

Mr. MEEHAN. Ms. McPeak. 

Ms. MCPEAK. Well, I certainly don’t hear from consumers who 

are saving any money on insurance premiums. I hear quite the opposite from consumers who are calling my office. 

What I would suggest about the transitional plans, if you can 

keep your policy—if you like your policy you can keep it. In Tennessee we allowed those transitional policies to continue knowing 

that that was going to further segment the market because we 

wanted to have those choices available to our Tennessee consumers. 

The problem was that position was decided by President Obama 

45 days before the plan year started, so the rates were already filed 

and approved in our office. The plans were already on the Federally facilitated exchange rates to be purchased. So allowing those 

transitional plans to continue didn’t have nearly the significant effect, and the insurers were already locked into rates that they had 

already seen. 

I think what you are seeing in the marketplace, with the increased deductible, copays and limited networks are insurers and 

consumers trying to moderate some of those claims-based rate increases that are justified in trying to moderate those 30 percent 

into lower amounts. So they are choosing policies that, again, have 

payment on the back end as you described, or have such limited 

network that they don’t have the provider choice as before the 

ACA. 

Mr. MEEHAN. Mr. Redmer. 

Mr. REDMER. Yes, two things, number one, the narrow provider 

markets, this gives the carrier the ability to demand and extract 

greater concessions from those providers that are left in that narrow market. And I would speculate that if the markets are made 

broader, and they have more providers, that is going to result in 

even higher price increases than we are seeing now. And when you 

talk about the effects on the consumer, and I just want to throw 

this on your radar screen, because I think it is a national issue, 

and that is the significant, unbridled cost of air transportation, primarily helicopters, that is resulting in balance billing for the consumers, thousands and thousands and thousands of dollars. And 

these are folks who are not in networks; it is a significant national 

issue. 

Mr. MEEHAN. What choice do you have if you are lying on a 

turnpike after an accident and they call—— 


joloto on DSKB35BYQ1 with HEARING
56 

Mr. REDMER. You don’t, that is the problem. You don’t. And oftentimes the patient, who has no choice, has no clue that they are 

going to get a $25,000 to $40,000 bill, there is going to be a balance 

bill from a helicopter service. 

Chairman ROSKAM. The time has expired. Mr. Doggett. 

Mr. DOGGETT. Thank you, Mr. Chairman. Thanks to all of our 

witnesses. Mr. Chandler, I was pleased that you drew attention to 

the fact that 17 percent of our gross domestic product is focused on 

health care and it could rise to almost a fourth of our total national 

economic output. That was certainly a consideration of our writing 

the Affordable Care Act, in noting that despite the fact that we devote some resources to health care that we don’t get the best outcomes verses some of the countries that are devoting significantly 

less. Of course, one of the objectives, and there were modest improvements in the Affordable Care Act, was to address the problem 

of soaring costs. 

One of the major omissions of the Affordable Care Act has been 

the failure to address soaring pharmaceutical costs. Indeed, particularly in the last year, the cost of the—soaring costs of cancer 

drugs has been almost inconceivable to see those who are facing a 

diagnosis of death, facing not only that, but a diagnosis of personal 

bankruptcy on their copays for drugs that are costing tens of thousands of dollars, over $100,000 for some. Not only having the impact of personal bankruptcies, but threatening insurers and Medicare, given our inability to negotiate for Medicare on drug prices. 

One of the very modest steps taken in the Affordable Care Act 

was to set up an independent panel given the inability of Congress 

to address soaring health care costs. And so the action that was 

taken is that yesterday, we repealed that modest cost containment 

provision, that won’t take effect for another 9 years, and pay for 

the repeal by limiting the prevention fund, taking money that was 

designed to encourage preventative steps such as treating diabetes 

and preventing diabetes instead of paying for amputations. All of 

this done without any alternatives being offered, as to how rising 

healthcare costs would be addressed. 

Today, we are speculating on an incomplete of proposed premium 

increases that will not be finalized for months, that some States 

have the ability to deny or limit in the rate review process, and 

many States do not. Against that speculation, we have a certainty 

and that is that if tomorrow at 10 o’clock or one of the next few 

days, the United States Supreme Court provides an adverse decision in King against Burwell, provides the result that Chairman 

Roskam, Chairman Ryan, my two Texas Senators have sought that 

would deny tax credits for families who live in our States, that 

those folks will see an extraordinary increase in their out-of-pocket 

cost. 

About 6.4 million people living in States that have refused to set 

up private insurance marketplaces at the State level will lose their 

tax credits, that is a cumulative loss of about $1.7 billion every 

month. In Texas, that would mean an average 305 percent premium increase for 800,000 Texans, at least in terms of what their 

out-of-pocket premium costs are. 

Mr. DOGGETT. I am concerned about what is happening with 

rising premiums. Commissioner Kreidler, is the increase in health 


joloto on DSKB35BYQ1 with HEARING
57 

insurance premiums, did that start with the passage of the Affordable Care Act, or did we have some issues concerning rising 

healthcare premiums before that Act ever came law? 

Mr. KREIDLER. Thank you, Mr. Doggett. 

The issue of rising premiums has been with us for a long time. 

And since I have been serving as insurance commissioner 14-plus 

years now, I can tell you it has been a real problem that is actually 

looking better right now with the Affordable Care Act than what 

we saw before, the routine nature. We were seeing people who were 

sicker, buying health insurance. If you were healthier, you didn’t 

buy it. You opt in. If you try to buy it when you are sick, that has 

a very negative impact on the market. Now with a mandate to 

have it, it has had the effect of helping to hold down the rate increases. But we need to do more than that. And one of the issues 

that you mentioned, Mr. Doggett, was the issue of pharmaceuticals. 

We need, and we are seeing a major transition to generics. And I 

am very supportive of the health insurers who want to make sure 

they go to generics first, but they need to be able to go to brand 

name at the appropriate time. They can’t discriminate unfairly 

against consumers who have bought health insurance. 

And when it comes to the issue of narrow networks, that is not 

new. That was there before healthcare reform went into effect. It 

was something that large employers were instituting, had instituted in the past. The self-insurance plans, which we as regulators 

don’t regulate, it came into the regulated market, particularly inside the exchange starting in 2014. But if it is done right, and that 

is why I adopted rules on network adequacy, if it is done right, it 

can improve quality and outcome and lower the cost, but you need 

to make sure you are holding carriers accountable, don’t let them 

determine the rules for themselves. 

Mr. DOGGETT. Thank you very much. 

Chairman ROSKAM. Mr. Renacci. 

Mr. RENACCI. Thank you, Mr. Chairman. I want to thank you 

for the book. 

Mr. Lewis, it is an honor to serve with you. I look forward to 

reading that book. 

And, the witnesses, I appreciate you all being here. It is interesting, I was in business for 28 years before I came here. I was in 

the health care business. And yes, premiums did go up, but if I 

ever saw a premium go up more than 8 or 9 percent, it was a 

shock. Today, when I go through my district and I hear 62 percent 

increase, 48 percent increase, 39 percent increase, it shocks me 

when I hear premiums costs are coming down, or we hear new statistics that say they are coming down, because that is not what the 

real world is telling me when I go back to my district and I go to 

these employers. 

And one thing when I do go to the employers, I ask them if I can 

talk to the employees. And it is interesting, because it is a requirement. I want to talk to your employees. I ask every one of them 

that are buying their own insurance, tell me if your healthcare 

costs are coming down. Put your hand up. Now, I realize people are 

always afraid of putting their hand up, but I have had only one 

person tell me that the Affordable Care Act is helping them. Now, 

maybe I am going to the wrong businesses, I don’t know. But I 


joloto on DSKB35BYQ1 with HEARING
58 

seem to be going to business after business and talking to employees. 

And I also had a similar situation Mr. Kelly had. I had an individual at a local restaurant, Wadsworth, Ohio, say to me, Congressman, I now am part of the Affordable Care Act, but can you 

help me, because my husband and I work 40 hours a week, and we 

can’t afford this deductible. So we really don’t have insurance. And 

it is shocking when you hear some of those stories as well. 

I do go around to the hospitals. Again, being in health care, I am 

always trying to find out what the Affordable Care Act has done. 

And I ask the question, have the emergency room visits increased? 

At the same time, you know, we are learning about these insurance 

premium increases. We have been hearing and I have been hearing 

emergency room visits are increasing. 

Without objection, I would like to enter this May 5, 2015, Wall 

Street Journal article entitled U.S. Emergency Room Visits Keep 

Climbing into the record. 

Chairman ROSKAM. So ordered. 

[The information follows:] 


joloto on DSKB35BYQ1 with HEARING
59 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.036
60 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.037
61 

f 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.038
62 

Mr. RENACCI. The article explains that even though people 

have insurance, they can’t find providers or get appointments with 

providers they can find, so they are still going to the emergency 

room. 

Now, for the panel, I think you would all agree with this, but 

doesn’t greater emergency room use lead—does it lead to higher 

costs or lower costs? Each one of the panel members, higher costs 

or lower costs if we are going to the emergency room? 

Mr. REDMER. Certainly, I think higher. 

Mr. RENACCI. Mr. Kreidler. 

Mr. KREIDLER. I would also say definitely higher. But in the 

State of Washington, we have actually seen about a 10 percent reduction in emergency room visits. Frequently—— 

Mr. RENACCI. Washington must be the only State. Ohio is not 

doing that. But I appreciate—— 

Mr. KREIDLER. If you go into an emergency room, what they 

wind up telling you is, if it is not an emergency situation, go down 

to urgent care down the street. It is going to cost you a lot less. 

And that has had a dramatic impact. 

Mr. RENACCI. Ms. McPeak. 

Ms. MCPEAK. I cannot dispute. I would say higher. 

Mr. RENACCI. Mr. Chandler. 

Mr. CHANDLER. The issue is that once you are in the emergency room, there are a wild number of tests that will be performed. Insurers are not capable of exercising sensible utilization 

review, and as a result, the costs can often be higher. 

Mr. RENACCI. It is amazing, because I always thought the purpose of ACA was really, especially with subsidized insurance, to reduce emergency room visits. And, again, that is not what I am seeing in Ohio. 

Ms. McPeak, you mentioned that many insurers have made 

changes to their networks to limit the providers people can see. 

What has your State experience been? 

Ms. MCPEAK. We are just now beginning to see very limited 

networks attached to rates implants for the 2016 plan year. As I 

mentioned before, I do think that is an attempt by the insurers to 

moderate the rate increases that has been requested and provide 

choice to consumers so that you can have a skinnier network, and 

potentially reduce your own costs if you are willing to take the risk 

that you may not have full access to the wide provider network to 

which you are accustomed. 

Mr. RENACCI. How has the President’s promise that you can 

keep your doctor if you like your doctor worked out in Tennessee? 

Ms. MCPEAK. Well, that is about the same as the promise that 

you can keep your policy if you like it, in my opinion. That is not 

working out very well. And we are hearing from consumers who 

are having difficulty navigating the federally-facilitated marketplace to see where the provider lists are maintained and whether 

their providers are included, and they might get into a product 

that, in fact, does not have the doctor which they like. 

Mr. RENACCI. It is the same thing I am seeing in Ohio. I think 

this is an important point, just having an insurance card doesn’t 

really mean you have access to care. I think you all agree? 


joloto on DSKB35BYQ1 with HEARING
63 

Ms. MCPEAK. I would agree. For, you know, economic reasons, 

access reasons, and utilization, certainly. 

Mr. RENACCI. Thank you, Mr. Chairman. I yield back. 

Chairman ROSKAM. Mr. Crowley of New York. 

Mr. CROWLEY. Thank you, Mr. Chairman. Thank you, as well, 

for the book. I appreciate your kindness in giving it to all of us. 

And we can never say enough about the honor it is to serve with 

Mr. John Lewis here in the House of Representatives, particularly 

in light of what took place last week in the south and all that he 

has lived for, has put his life on the line for. The ripping events 

of last week has left a scar upon our Nation, and no one knows it 

more than John Lewis. Thank you, John. I love you. You are a 

great man. 

Mr. LEWIS. Thank you. 

Mr. CROWLEY. I am a little bit baffled, though, by what my colleagues think they are going to accomplish today by holding this 

hearing. Yes, opponents to the Affordable Care Act have tried numerous tactics to scare people away from the law. That is nothing 

new. They seem to think if they keep on shouting premium increases, ObamaCare, death panels, then people will avoid getting 

insurance through the law, which is somehow a victory for them. 

But that is no victory for anyone. 

Commissioner Kreidler, you have mentioned that enrollment 

plays a big part in keeping premiums stable. That is part of the 

very concept of insurance, isn’t it? Bigger—let me just finish. Bigger, healthier pool of enrollees spreads out costs so premiums can 

stay steady; is that not the case? 

Mr. KREIDLER. Very definitely. It is the law of large numbers. 

If you don’t get good risk and bad risk and have large numbers, 

a large pool, it is very hard to control rates. 

Mr. CROWLEY. So all of a sudden, this sudden outrage over premium increases is going to have the effect of scaring people away 

from the ACA’s insurance markets, making it harder to prevent 

those very premium increases. But aside from that, I don’t understand this nostalgia for the way things used to be before the Affordable Care Act was in place, when insurance companies could do 

whatever they wanted for however much they wanted to charge. It 

is as if there were never premium increases, never problems with 

health care in the past. But that is not what my constituents experience back in New York. My constituents in Queens and the Bronx 

are small business owners who saw their insurance bills go up 

every year with no explanation. 

They were families buying insurance on the individual market, 

or maybe couldn’t shop around after getting hit with a double-digit 

increase because they had an old injury that would get called a 

pre-existing condition, and they would be denied new coverage. I 

am proud that those days are days of the past. 

Commissioner Kreidler, today if an insurance company just feels 

like raising rates to pad their profits without spending more on patient care, can they do that? 

Mr. KREIDLER. Mr. Crowley, what we see now is the insurance 

companies have to play by a standard set of rules. So they can’t 

game the system. The game before was try to avoid sick people, 

only insure healthy people. And if you were one of the sick people, 


joloto on DSKB35BYQ1 with HEARING
64 

you were obviously kind of left out. Now with standard rules, we 

are actually introducing real competition between insurance companies. And that is one reason I am so proud that in the State of 

Washington, we have had a 50 percent increase in the number of 

insurers. So they are competing with a standard set of rules. It 

isn’t the gaming that was employed in the past. 

Mr. CROWLEY. Well, it is also because the Affordable Care Act 

requires that 80 percent of the premiums go directly to better care. 

If consumers do get a rate increase notice, they are left to just— 

they would love to just shrug their shoulders. That is just the way 

it is. That is not the case anymore, is it? 

Mr. KREIDLER. That is correct. You know, in the State of Washington, we were fortunate because we had a very competitive market, we had none that had problems meeting the 80 percent rule. 

That wasn’t true for many other States. And it is now because of 

the Federal law that they have to meet as the standard. 

Mr. CROWLEY. What can regulators in States like my home 

State of New York or Washington do when they see exorbitantly 

high rates going into—or the request for that? What can they do 

now? 

Mr. KREIDLER. One is they have an opportunity to shop. They 

can go—if they had a carrier before, if you had a preexisting condition, you couldn’t move to another insurer, because they wouldn’t 

want to insure you because of your preexisting medical condition. 

Now you have guaranteed issue. You can make choices. You can 

make decisions as to which plan, how much out-of-pocket expense 

do you want to have, what kind of coverage do you want? And you 

also want to make sure that your doctor is in a hospital. I will 

agree this has been one of the challenges that we have had is making it a lot more transparent so it is easier to identify the hospitals 

and doctors that are in a particular carrier’s network when you 

make the decision, but you have those kind of choices and didn’t 

before. 

Mr. CROWLEY. What I can tell you is that in New York State, 

we have consistently used the authority to encourage—that was 

authorized by the ACA to fight premium increases. The State has 

come to the rescue and to stop that. 

So, Mr. Chairman, I just want to say, I would suggest that three 

out of the four panelists would be opposed to the ACA, I am just 

taking a guess, and one would be in favor of it. With that, I yield 

back the balance of my time. 

Chairman ROSKAM. It was a rhetorical question, but I will answer it. What are we trying to accomplish? What we are trying to 

accomplish is the work of the subcommittee under the House rules, 

which is to evaluate Federal programs. We haven’t had a bigger 

Federal program since the passage of the Affordable Care Act. 

There is nobody that is nostalgic about the past. The irony is, when 

President Obama won his election, overwhelming majority of Americans agreed on two things: They agreed that healthcare costs were 

going up at a rate which was basically unsustainable, and they 

were basically scandalized by the idea of not being able to get access to an insurance pool based on a preexisting condition. The loss 

and the regret is—that we are focusing in today is to say, we 

should have focused in on those things, concentrate it there, but inVerDate Sep 11 2014 12:58 Feb 14, 2017 Jkt 022147 PO 00000 Frm 00068 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\22147.XXX 22147

joloto on DSKB35BYQ1 with HEARING
65 

stead the administration, and it was their prerogative, went in a 

different direction. The false claim and false narrative was it is all 

going to be great. You get to keep your doctor. Premiums are going 

down. 

So it is not as if we are scaring people away from the Affordable 

Care Act. The Affordable Care Act is scaring people away from the 

Affordable Care Act. 

And with that, I recognize the gentleman from North Carolina, 

Mr. Holding. 

Mr. HOLDING. Thank you, Mr. Chairman. 

It is somewhat striking to me that there are many insurers out 

there that appear to have paid out more in claims than they are 

collecting in premiums. For example, Blue Cross/Blue Shield of 

Texas has reported that it collected $2.1 billion in 2014, but paid 

out $2.5 billion in claims. So does anyone on the panel think that 

it is sustainable for an insurer to pay out more in claims than it 

collects in premiums? 

Ms. MCPEAK. No. 

Mr. REDMER. No, it is not sustainable, and of—an observation 

is, our Blue Cross plan has lost money in the last couple of years, 

and we have seen a reduction in their reserves. 

One of the reasons that they are coming back with the large rate 

increase, obviously, is because they have lost money. The gentleman from New York mentioned that if carriers don’t hit a certain loss ratio, they pay rebates back to the consumer. So we have 

got a phenomenon where if you lose money, it stays lost, but you 

can only make it up incrementally, because if you make too much, 

it goes back to the consumer. 

Mr. HOLDING. Right. 

Mr. REDMER. So we can debate whether that is good or bad, but 

you can only incrementally make any losses back. You can’t make 

it up in 1 or 2 years. 

Mr. HOLDING. So if you are an insurer losing money under this 

scenario, and your options are you can either raise your rates, raise 

your premiums, you can just pack up and leave and stop insuring 

people in this segment, you know, leave the State. Now, this year, 

obviously, we have a very complete set of numbers, because we 

have already had a year of the program being in place, as insurers 

have a good idea of what they are dealing with. So what impact 

is the data review for the upcoming year having on the rates? 

Mr. Redmer, you want to talk about that a little bit? 

Mr. REDMER. Well, certainly, you can see on my testimony, we 

have had one carrier that actually came in and was asking for a 

small reduction in the individual rates. And CareFirst, our Blues 

plan, is asking for a 30 percent rate increase, and it is anywhere 

in between. So that is a result of increased costs. It is also a result, 

though, of having a lot of uncertainty in the marketplace. 

You know, with the open enrollment last year, you didn’t know 

who you were going to get, and what that experience was going to 

be. If you go back to my testimony, I speculated that Blue Cross 

and Blue Shield, our large carrier, they saw a phenomenon that because of the disparity between the individual market crisis and the 

small group crisis, there were a lot of small employers, thousands 

of them in Maryland, that just threw up their hands. They canVerDate Sep 11 2014 12:58 Feb 14, 2017 Jkt 022147 PO 00000 Frm 00069 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\22147.XXX 22147

joloto on DSKB35BYQ1 with HEARING
66 

celed their plans. They disbanded them, and those folks moved and 

migrated to the individual marketplace. 

I believe that—and this is my speculation—that a lot of those 

folks, that if they were already sicker and utilizing care, and they 

were with CareFirst, they migrated to CareFirst with the lower individual premiums; and those that were young and healthy, they 

were buying based on price, and they went to some of the other 

carriers. So I think they were victims of adverse selection when 

thousands of these small employers just disbanded their plans. 

Mr. HOLDING. Right. 

Mr. CHANDLER. Representative Holding, could I—— 

Mr. HOLDING. She was raising her hand. 

Ms. MCPEAK. Thank you. I appreciate the opportunity to respond. The year of data has been extremely helpful from the 2014 

calendar year. But as I mentioned, our loss ratios were extremely 

high for that year. One of the functional challenges, though, is that 

because of the time schedule arranged by HHS, we were requiring 

insurers to file the 2016 rates before they had a very clear picture 

of their enrollees for 2015. 

Because of the expanded open enrollment period and the 90-day 

grace period to pay premiums, insurers were filing rate for 2016 

without even knowing who they had for 2015. Now, we are an effective rate review State. We take our rate review responsibility 

very seriously, so we are asking for supplemental information on 

a month-by-month basis as real data comes in for 2015. But it is 

still very, very new, and we haven’t actually seen a large uptick 

and a positive trend on loss ratio yet. 

Mr. HOLDING. Thank you. Mr. Chairman, does Mr. Chandler 

have 30 seconds just to respond to that? 

Chairman ROSKAM. He does. 

Mr. HOLDING. He is anxious. Thank you. 

Mr. CHANDLER. Thank you. I would just say the following, 

don’t trust my numbers. Trust the Obama administration’s numbers, at least on this. Their calculator shows a 14 percent increase 

in claims experience projected for 2016. Yes, of course, insurance 

commissioners can review rates. And if insurers are being greedy, 

they can strike that down. But if they strike down rates that are, 

in fact, reasonable due to claims increases, I expect to see exit from 

the market. It is not sustainable for an insurer to keep losing 

money. 

Mr. HOLDING. Thank you. 

Mr. Chairman, thanks. 

Chairman ROSKAM. Mr. Smith of Missouri. 

Mr. SMITH of Missouri. Thank you, Mr. Chairman. 

I want to thank the witnesses for being here. 

The President campaigned aggressively on the promise to lower 

out-of-pocket expenses for families by roughly $2,500 a year. However, insurers that cover my constituents, just in the last 2 years, 

we have seen an increase by one insurance provider of 22.9 percent 

in 2014. This year they have requested an additional 22.7 percent 

increase because of the one-size-fits-all approach under ObamaCare 

of all the different burdensome regulations, rules, everything that 

is coming into place. But in my opinion, this administration cannot 

continue to believe that ObamaCare would reduce costs for families 


joloto on DSKB35BYQ1 with HEARING
67 

and individuals throughout my district. That is not what I am 

hearing back home, and that is what I don’t believe is a reality. 

But the families in my district need a healthcare system with 

more choice, more access, and that is more affordable. But what I 

seem to be reading on a daily basis is that instead of more choices, 

we are getting fewer. The burden on insurers is so high that they 

are consolidating. Providers are also consolidating for the same 

reason, the extra costs and bureaucracy costs of the healthcare system that this administration has created. 

Now the Supreme Court decision may expose another broken 

promise by the President and the congressional Democrats to my 

constituents who may be required to get health care, but may lose 

their subsidies. 

My question, Mr. Chandler, why do you think these premiums 

are increasing across the country and in my district? 

Mr. CHANDLER. I think the reason, first of all, is the continued 

escalation of healthcare costs, of underlying healthcare costs. And 

the Affordable Care Act did very little. Yes, it did a few things, but 

it did very little to address that. And in some sense, by providing 

insurance without effective utilization review to a larger number of 

people, it put yet more strain on the system. 

The second reason is the adverse selection story, which is perfectly foreseeable where you have inadequate controls built into the 

law. The people who are going to purchase insurance are, as has 

been experienced, disproportionately ill. And that is one of the reasons that you see premium increases going up. 

The phase-out of subsidies is a factor, but it is not the primary 

factor in my opinion. 

Mr. SMITH of Missouri. So do you think that with, say, the increase in all premiums, I gave the example of 22.9 percent last 

year in my district and then an additional 22.7 requested, do you 

see that my constituent is getting the increase in benefits, or is it 

the same care or less care? 

Mr. CHANDLER. I am not aware that insurers are providing additional benefits pursuant to these policies. 

Mr. SMITH of Missouri. Okay. So they are just getting the same 

kind of care for more expenses, probably. 

Mr. Kreidler, my concern is, you made a statement earlier that 

you felt like things were looking a little bit better when it comes 

to premiums and that case. How do you feel like it is looking at 

individuals that are 27 years old? 

Mr. KREIDLER. Thank you for the question. I think from the 

standpoint of somebody who is younger, they are not immortal. 

They run the risks. And by virtue of having insurance, it is a lot 

better for them. If they are under age 26, frequently, they can stay 

on their parents’ policy. 

At the same time, you know, it is—what we are—if you looked 

at the healthcare spending and thought you were going to actually 

reduce it in this country, I think that would be unrealistic, both because of an aging population, but also because of the changes in 

healthcare delivery. Those costs are going to go up. What we have 

to do is bend that cost curve down so it doesn’t go up as rapidly 

as it has been. 


joloto on DSKB35BYQ1 with HEARING
68 

Mr. SMITH of Missouri. And that is my concern, is the cost 

curve. And I am second youngest Republican member of Congress. 

So when I look at a 27-year-old, who according to the Manhattan 

Institute have had their premiums increase since ObamaCare has 

came into effect by 97 percent, that is not managing the cost curve 

for the younger Americans. That, to me, says that they are definitely not going to purchase insurance if there are going to be a 

97 percent increase prior to the ACA. 

What are your thoughts on that? It doesn’t look like it is looking 

better to me as a young American. 

Mr. KREIDLER. I am not familiar with any numbers like that 

from the standpoint—— 

Mr. SMITH of Missouri. What numbers are you familiar with? 

Mr. KREIDLER [continuing]. From the numbers I am reviewing 

that you are describing. I am not saying it is not true. I am not 

familiar, my actuaries are not familiar with seeing those kind of 

numbers in my office. 

Mr. SMITH of Missouri. Do you have any numbers on individuals in their late 20s experiencing premium increases? 

Mr. KREIDLER. Yes, we would and do. 

Mr. SMITH of Missouri. Do you know them offhand? 

Mr. KREIDLER. No, I don’t know. 

Mr. SMITH of Missouri. Okay. I would be interested to see what 

your numbers are. 

Mr. KREIDLER. Sure. It is. This is clear that I think the real 

challenge is what we face right now is bending that cost curve 

down as a Nation, and we have to do it fairly and equitably. But 

leaving 27-year-olds without health insurance is obviously going to 

be a problem. The test is going to be making sure we are bending 

that cost curve down so they are getting adequate insurance so 

that they don’t cost impact the rest of us when bad things happen. 

Mr. SMITH of Missouri. I would totally agree. I think the cost 

curve causes us to lose more people that would have health insurance. 

Mr. Chairman, thank you for your time. 

Chairman ROSKAM. Dr. McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. I appreciate you 

letting me be an adjunct member of the committee. 

There is a recent article in The Wall Street Journal talking about 

the conglomeration or the merging of healthcare providers, insurance companies. And they are talking about what is happening in 

a variety of markets around the United States, and I—and talking 

about antitrust questions. And the whole question, our fraud laws 

are really based, up to this point, on a fee-for-service system, meaning the Stark Law and other aspects of it, are really designed to 

deal with a fee-for-service system. Now, we have got managed care 

and we have got all these things going on. 

I would like to hear you talk about where you think health care 

is going in terms of the mergers in these States where you are 

going to have—if the re-enterprise system is based on competition, 

it means you have got to have more than one or maybe more than 

two to have anything that could be called real competition. And if 

it is just 2 gorillas dividing up the pie in the State of whatever, 

it becomes not very competitive. And so I am interested in hearing 


joloto on DSKB35BYQ1 with HEARING
69 

your anticipation of where you think this scheme of Affordable 

Care Act is going to go in the future. So anybody can pile in on 

it. You want to start? 

Mr. REDMER. I think your instincts are correct. I think mergers 

and a reduction of the number of carriers, in and of itself, is bad 

for the consumer and is probably bad for providers as well as the 

larger entities can extract greater concessions from the providers. 

Another observation, though, in addition to that, is there are a 

number of provisions of the Affordable Care Act that are encouraging and resulting in these hospital-owned provider organizations 

where physicians are becoming employed by hospitals. And I don’t 

know about your States, but I can tell you in Maryland, that market has come and gone a couple of times in the last 30 years. And 

at least in Maryland, these hospitals really haven’t shown a lot of 

talent in running efficiently and cost effectively physician practices. 

So I am concerned that that is going to lead to greater inefficiency and greater costs in the long term. 

Mr. MCDERMOTT. Can I just clarify on that? One of the things 

that happens, of course, is if you buy a doctor’s practice, and you 

are used to seeing patients in your practice and now you are seeing 

them in the hospital, the hospital charges a facility fee of some 

sort, which jacks up the price on—and people are very surprised 

that I got over here for $30 and now I am getting it for $75 having 

it done, the same thing—— 

Mr. REDMER. Well, there is some of that, but, you know, we are 

also seeing hospital-owned physician practices that are outside of 

the hospital setting. You know, sometimes you just see the changing of the sign, and they are—they are community-based and outside the hospital, but they are not necessarily more efficient nor 

cost effective than an individual practice. 

Ms. MCPEAK. Thank you. I would agree that your instincts are 

correct, and that we are going to see continued consolidation on behalf of health insurers and providers. In a certain sense, while we 

all need to be concerned from antitrust issues, it makes a bit of 

sense from the insurers’ standpoint because they are looking to 

consolidate and gain efficiency in administration and gain provider 

networks. Now, on the consumer side, when the ACA limits the 

amount of areas upon which an insurer can compete because all insurers have to offer products on the essential health benefits platform, has to offer products from the metallic tiers of certain actuarial value percentages and amounts, you know, the consumers appreciate that because it is transparency and it is easy to compare 

policies. But insures don’t have much to compete on at that point 

except for provider networks, administrative efficiencies, and anything else that they can distinguished themselves, that they can no 

longer designate products and compete on that basis. So the ACA 

in itself limits those areas of competition that I think are leading 

to consolidations that we are witnessing. 

Mr. KREIDLER. Mr. McDermott, I don’t know that we can really 

attribute the consolidation that we are seeing right now in the 

health care environment, whether it is the insurers or providers, to 

the Affordable Care Act. I think particularly in the case of providers, that trend was well underway before the Affordable Care 

Act. My concern is that we are now starting to see it with the inVerDate Sep 11 2014 12:58 Feb 14, 2017 Jkt 022147 PO 00000 Frm 00073 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\22147.XXX 22147

joloto on DSKB35BYQ1 with HEARING
70 

surers, which may be more of a reaction to providers doing it. Hospitals who are buying outpatient clinics and, as you point out, they 

can charge higher rates. It means physicians. When I took office in 

the year 2001, most of them were not employees. Now you see a 

very large percentage of physicians who are employees because 

their clinics—they have either sold their clinics to the hospital, or 

they were acquired by the hospital and are now salaried. I worry 

about that. I also worry about what happens with the consolidation 

among insurers, and I think that is something that, as regulators, 

we will have a mutual concern about to make sure we maintain the 

viability of the health insurance market, whether it is the providers or the insurers themselves. 

Chairman ROSKAM. Mrs. Noem. 

Mrs. NOEM. Thank you, Mr. Chairman. And, Mr. Chairman, I 

want to thank you for mentioning my home State in your opening 

comments, because we do face some unique challenges in South 

Dakota with one of our largest insurance companies recently announcing some of the increases to premiums up to 51 percent with 

an average of about 42 percent. So that is a lot for anyone to try 

to deal with in one calendar year, much less try to continue to insure their family and make sure they are making the best decision. 

What my question wanted to cover specifically was if the Affordable Care Act is requiring individuals and families to purchase coverage that they don’t need, and this is one of the challenges that 

we have seen and possibly has driven up costs in line with that as 

well. 

So, Dr. Chandler, I know that you before, in this hearing, described why premiums are increasing. Could you just restate for 

me if you believe that ObamaCare was meant to address 

healthcare costs and what it was, especially considering some of 

the testimony of Mr. Kreidler earlier, I want to have it clarified 

what ObamaCare was meant to do to healthcare costs. What was 

the intention of the Act, and how was it to impact healthcare costs 

for Americans? 

Mr. CHANDLER. Well, I would say the problem is that 

ObamaCare, or the Affordable Care Act, conceptualized wrongly 

the problem as one within the insurance industry rather than a 

problem primarily located within health care itself as fed back to 

by insurance. And so while it attempted to deal with insurance, I 

believe unsuccessfully by and large, it really failed, with one exception I can talk about, to address the major problem, which is cost 

increases for medicine, more procedures, more costly procedures. As 

one of the gentlemen mentioned, higher pharmaceutical drug 

prices. And so the one exception I would say is the creation of accountable care organizations, which may or may not reduce costs. 

Mrs. NOEM. But by and large the Act has gradually increased 

the burden on Americans, do you believe, since it has been enacted? 

Mr. CHANDLER. I do. 

Mrs. NOEM. Ms. McPeak, in your testimony you say ObamaCare 

significantly changes requirements for health care plans. Can you 

briefly describe some of those changes? 

Ms. MCPEAK. Yes. I alluded to those a moment ago. The essential health benefit platform, I think, does require citizens to purVerDate Sep 11 2014 12:58 Feb 14, 2017 Jkt 022147 PO 00000 Frm 00074 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\22147.XXX 22147

joloto on DSKB35BYQ1 with HEARING
71 

chase coverages that they might not necessarily need and wouldn’t 

choose to purchase on their own. What we hear frequently in Tennessee is, I am a 27-year-old male; I don’t want maternity coverage, and I have to have a plan that includes something like that. 

So I do think that the inability to tailor products to the needs of 

your individual consumers has been affected by the Affordable Care 

Act, and the insurers can no longer tailor those plans to the distinct segment of the populations they are trying to serve. 

Mrs. NOEM. So can I buy a policy with fewer benefits that could 

cost me less? 

Ms. MCPEAK. Not unless it was compliant with the essential 

health benefits. I mean, you can certainly modify your cost sharing 

and your deductible amounts. You can limit the providers that you 

would agree to see under the plan, but the basic benefits have to 

be standardized under the essential health benefits platform. 

Mrs. NOEM. So the Federal Government is requiring my constituents to buy benefits that they may or may not want at a higher cost to them? 

Ms. MCPEAK. We do hear that from our own citizens in Tennessee, yes. 

Mrs. NOEM. I just wanted to close with this- we have talked to 

many individuals and families across my State and across the 

country. I would be remiss if I didn’t mention the rate hikes for 

small businesses as well. And I am talking about the small group 

market. The law completely upsets the traditional small group 

market, lumping mid-sized businesses with small businesses. And 

this definition change would have a huge impact. In fact, studies 

from Oliver Wyman and the agency for health care research and 

quality estimates that 22,000 South Dakota employees and their 

dependents will receive cancellation notices, and most will see an 

average premium increase of 18 percent. 

So for Obama administration bureaucrats here in Washington, 

these 22,000 South Dakotans are not just points on a graph. They 

are people that would be impacted. It is their real lives. And with 

that, Mr. Chairman, I wanted to draw light to that. And I thank 

you for holding this hearing. I yield back. 

Chairman ROSKAM. Mrs. Black of Tennessee. 

Mrs. BLACK. Thank you, again, Mr. Chairman, for allowing me 

to be here as a guest and have an opportunity to be able to ask 

questions. I thank you for bringing this very critical topic before 

the public so that those that are listening to this know that we do 

care about either the lack of care or the costs for them to get care. 

And I also want to say, Mr. Lewis, you are absolutely a giant in 

the civil rights movement, and it is such an honor to serve with 

you and get to know you personally. And I will get you my book 

so you can sign it for me as well. 

Mr. LEWIS. Thank you. 

Mrs. BLACK. Ms. McPeak, I want to thank you, again, for being 

here. And you have in your testimony that there is a consistent uncertainty on the part of the Obama administration in the ACA’s implementation. I can say that we have seen so many changes that 

the Congressional Budget Office, the CBO, has now said they are 

no longer even to score the changes that have taken place. But 

most recently, there was a change that was released in the guidVerDate Sep 11 2014 12:58 Feb 14, 2017 Jkt 022147 PO 00000 Frm 00075 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\22147.XXX 22147

joloto on DSKB35BYQ1 with HEARING
72 

ance of the market withdrawal. And according to the guidance, if 

an insurance company chooses to leave a service area, or if they 

change the type of product that they are offering from, for instance, 

a PPO to an EPO, then the company is excluded from operating in 

that market for 5 years. The guidance was apparently issued after 

all the plans had filed their rates with the Department of Insurance, and meaning that it was too late for any of these carriers to 

revise any of those filings in response to what this guidance was. 

Can you elaborate why this guidance would potentially disrupt 

the market in Tennessee? 

Ms. MCPEAK. Certainly. And I do have a very specific information about that particular guidance in my written testimony as 

well, because it was a distinct challenge for us in Tennessee. As 

you mentioned, the carriers had already filed their service areas 

and their rates for 2016 when the guidance was issued. And we 

have eight different service areas in Tennessee, and the guidance 

suggested that leaving one service area was going to be considered 

a market withdrawal, and the carrier would be prohibited for 5 

years from selling insurance in the State of Tennessee. Also a 

change in the plan. So moving from a PPO to an EPO plan was 

considered a market withdrawal. 

So insurers who filed the rates didn’t have any idea that this interpretation was outstanding, and then we received a guidance 

from HHS in this regard. And for Tennessee, that means that we 

would have lost five of our carriers for 2016 because of this guidance. And we were very, very concerned. We had a lot of conversations with HHS. And finally, HHS agreed that they would only implement this guidance for plan years 2017 and beyond. So it is still 

going to be an issue going forward. 

Mr. CHANDLER. Could I further respond to that? 

Mrs. BLACK. Yes. 

Mr. CHANDLER. It is a very important development that you 

have highlighted, Representative Black. And I would urge the Congress to take a look at two things. First, is that guidance actually 

within the scope of the Affordable Care Act? This is traditionally 

an area of State regulation, and I really wonder what provision in 

the ACA authorizes it. 

The second thing I would look at is whether the McCarran-Ferguson Act actually prohibits this sort of Federal interference in an 

area of traditional State regulation. So even putting the wisdom of 

the provision aside, I actually think there is a serious question that 

ought to be looked into, and for which for once there will be standing about the legality of this guidance. 

Mrs. BLACK. I have a very brief period of time. 

Mr. Redmer, did you want to reply to this as well? 

Mr. REDMER. I have nothing to add. 

Mrs. BLACK. Mr. Kreidler. 

Mr. KREIDLER. I actually agree. I think, as regulators, we 

found it a very difficult action on the part of the HHS and how 

they applied it. It was problematic. I think the real question is, is 

this one where HHS sees the problem? And the problem would be 

if you come in with a new plan, you can totally avoid showing your 

rates as going up precipitously. I think all Members of Congress, 

certainly the public, wants to know that information. They can’t 


joloto on DSKB35BYQ1 with HEARING
73 

use it as a way of obfuscating significant rate increases, make sure 

it is transparent. And if the only tool that is available to HHS is 

this Draconian steps that they have taken, it is obviously one 

where maybe this is where you could get unanimity to amend the 

Affordable Care Act in Congress so that they have a tool that is 

much more sensitive rather than saying you are out of business for 

5 years, which is the only option, I believe, that they have. It was 

inappropriate to try to do it the way they were doing it, though. 

Mrs. BLACK. Thank you. Mr. Chairman, I yield back. 

Chairman ROSKAM. Mr. Smith of Nebraska. 

Mr. SMITH of Nebraska. Thank you, Mr. Chairman. Thank you 

for allowing me to join the committee today. I appreciate our panel 

today. I wish we had more time, because I think we are covering 

some very important topics. And I am concerned about the consumer operated and oriented plans. It may be no surprise to you 

from Tennessee, being from Nebraska, we have had some issues. 

To date, HHS has awarded a reported $2 billion in Federal loans 

to establish these plans. I have asked HHS some questions, and I 

await the answers even still. 

Co-Opportunity in Nebraska and Iowa served over 100,000 individuals. And it was seized by the State of Iowa after only 1 year 

and has since been liquidated, as you know. And people who were 

on these plans have been left confused, understandably, and frustrated as well. And, once again, being forced to look for other insurance. And some even lost their plans that they were told they can 

keep, so that is why they went to Co-Opportunity, and yet, lost 

that as well. 

Tennessee Community Health Alliance, obviously, serves some 

folks there. Now, it is my understanding that there have been some 

troubling signs, and actual enrollment was suspended, is that accurate? 

Ms. MCPEAK. That is correct. 

Mr. SMITH of Nebraska. That was suspended when? 

Ms. MCPEAK. This was suspended in the middle of January of 

this year. 

Mr. SMITH of Nebraska. Okay. Certainly, I appreciate your work 

on the issue. I know that these are difficult things to manage and 

to deal with. Now, my understanding was that the State of Iowa 

wanted to suspend enrollment but were told they cannot suspend 

and were forced to still offer a so-called qualified health plan. And 

can you walk me through the process that Tennessee engaged in 

to be able to suspend the enrollment? 

Ms. MCPEAK. Well, certainly. Thank you for the question. It 

was a very difficult time for us, because we were first approached 

by Community Health Alliance that had been witnessing their enrollment increase substantially during the open enrollment period. 

And of course, middle of January was still during the open enrollment period. We did a quick examination. We shared their concern. 

We considered the co-op to be at financial capacity. 

A few triggers in our State statute for hazard plans of condition 

had been met. And we notified HHS. And I will tell you, our interaction was not as efficient as we had hoped at that point with 

HHS. They certainly had a differing opinion about the financial 

stability of the company. I took a very conservative approach, I 


joloto on DSKB35BYQ1 with HEARING
74 

think, because as Iowa and Nebraska experience had something occurred with the co-op, it would be my responsibility to take receivership action or liquidation or seizure of the company. And so we 

were not comfortable with the level of enrollment. There was a tremendous amount of back and forth. Eventually, it did take about 

a week’s time for HHS to agree to suspend the enrollment. But 

even that small victory, which, again, as I mention in my comments, we think was the right decision for Tennessee, has been 

problematic for our Tennessee residents. Because our residents 

that had a plan with Community Health Alliance had extreme difficulty when HHS froze the enrollment and suspended them from 

the exchange. There was no ability to add a child that was born 

or adopted or any other qualifying event, because in the mind of 

the federally-facilitated marketplace, the plan ceased to exist. So 

all of those changes had to be performed manually, and it has not 

gone smoothly. 

Mr. SMITH of Nebraska. Very interesting. I am curious, were 

you aware of Iowa’s request to suspend enrollment? 

Ms. MCPEAK. I was not aware of the request to suspend before 

the seizure occurred. I knew that it was possible to stop enrollment 

and to essentially turn off the exchange enrollees, but in my opinion, in Iowa and Nebraska, only after the seizure was ordered. 

Mr. SMITH of Nebraska. Okay. Do you have a pretty good feeling about where the Community Health Alliance stands today? 

Ms. MCPEAK. At our request, at Community Health Alliance 

has drawn down the full amount of startup loans from the Federal 

Government. We have a financial exam underway so that we know 

exactly where they stand. We have provided some helpful—we 

thought helpful—information about administrative expenses to the 

company. And the rate request for 2016 that they have filed is over 

32 percent increase. I don’t know that that is going to be sufficient 

to make the company sustainable and to remove the freeze for the 

upcoming year. 

Mr. SMITH of Nebraska. Okay. And to the best of your knowledge, is it true that only one of the 22 plans nationwide did not 

have an operating loss for 2014? 

Ms. MCPEAK. I did see a report that was consistent with that 

figure, yes, sir. 

Mr. SMITH of Nebraska. And would that maybe lead you to 

some concerns that maybe calling them loans wouldn’t be the most 

accurate description? 

Ms. MCPEAK. I would agree, yes. 

Mr. SMITH of Nebraska. Okay. Thank you. I yield back. 

Chairman ROSKAM. Thank you. 

I have got just a question for each of you. And, Mr. Redmer, I 

will start with you, because I know you have got a hard stop at 

12 noon. So go ahead, you have got our permission to head out 

when you need to head out. 

Mr. REDMER. Thank you. 

Chairman ROSKAM. But in your written testimony, one of the 

things that you said was that, in insuring your State, their predictions are that the pool is going to be actually older next year. 

Mr. REDMER. Correct. 


joloto on DSKB35BYQ1 with HEARING
75 

Chairman ROSKAM. Could you speak to that? That seems, it is 

not a term of art, but that is a trend that is toxic, isn’t it? I mean, 

what is the ramification of that? 

Mr. REDMER. That is true. That will, obviously, continue to 

drive up costs. So it is something that we are concerned about. 

Again, there is still a lot of uncertainty as to what the effect of the 

increased penalty would be and whether that is going to drive any 

younger folks into the marketplace. Or the flip side is the young 

folks will sit tight and remain uninsured, pay the penalty and only 

those folks that migrate into the pool will be those that were uninsured and now are sick, which obviously, will probably mean 

even—even a higher average age and increased morbidity. 

Chairman ROSKAM. So it is a ramification of adverse selection? 

Mr. REDMER. Correct. Potentially. 

Chairman ROSKAM. Okay. Ms. McPeak, could you give us an insight in terms of long-term trends that you are seeing in Tennessee 

as it relates to others things, Cadillac tax and so forth. How is this 

playing out for you? 

Ms. MCPEAK. In Tennessee right now, we are hearing a tremendous amount of feedback from our large employers that are concerned about being assessed what has been described as the Cadillac tax by having a high value health insurance plan available to 

their employees and executives. Of particular concern, and I share 

this concern when I hear it from the employers, I know Representative Black has probably heard the very same thing, the cost of onsite clinics for employers is being included in the value, in the costs 

of that—that health plan, that high value health plan, for purposes 

of calculating the Cadillac tax. And employers rather than—and 

that is a decision or a guidance that is underway through the Internal Revenue Service. Employers instead of paying that Cadillac 

tax, or instead choosing to close those onsite clinics, and it is very 

troubling, because reducing healthcare costs and certainly convenience to the employees and potentially a lack or a reduced amount 

of the co-pay or cost sharing for attending, seeking service at an 

onsite clinic, certainly seems to benefit all of us in reducing costs 

and providing care. And so including the costs of that clinic as a 

part of the high value health plan for purposes of Cadillac tax is 

certainly problematic, and we are hearing a great deal about that 

in Tennessee right now. 

Chairman ROSKAM. Mr. Kreidler, I realize that I have got the 

benefit of having John Lewis’s book many copies around me. And 

you don’t. But on page 178 of that book, Mr. Lewis points out that 

one of his phrases is, put all your cards on the table and put them 

face up. When I read that, I thought, wow, I have heard him say 

that. I was at a meeting in the back in that library behind us, and 

we had the Commissioner of the IRS at the time, we have had several, but one of the Commissioners of the IRS at the time, and Mr. 

Lewis, then chairman of this oversight subcommittee, said put all 

your cards on the table and put them face up. Just saying it would 

have been better if they had done that. They didn’t. 

But my cards faced up are this: I participated in the White 

House health care summit. This was one of the Affordable Care Act 

was being debated. It was an event at the Blair House. You may 

recall it. It was an all-day long sort of thing. The President was 


joloto on DSKB35BYQ1 with HEARING
76 

there, and Members of Congress and so forth. One of the points 

that I made to the President is contrary to one of the arguments 

that you are making. And I want to get just a little bit of a better 

sense from you about why you are making the argument. And it 

has to do with Medicaid expansion. One of the things, and I don’t 

recall sort of chapter and verse about this interaction, but one of 

the points that I made at this summit was, look, isn’t Medicaid expansion simply an expansion of welfare, and isn’t Medicaid a terribly broken system? And if you have a terribly broken system, why 

would you make that a foundation upon which you build a whole 

health care reform movement? 

So a couple of minutes ago you said, look, one of the reasons that 

it is working in Washington State is because of Medicaid expansion. That, I think that is a problem. I think it is a problem long 

term. So I am from Illinois, our Medicaid system is really a mess. 

You have got huge access issues on the one point, and Medicaid is 

basically cost shifted in a lot of ways. I know it is split, but it is 

cost shifted under the Federal taxpayer. So isn’t there a little bit 

of a cautionary tale in just Medicaid expansion as being part of this 

remedy? And isn’t that almost a structural weakness to the Affordable Care Act? 

Mr. KREIDLER. Mr. Chairman, one of the things that I found 

somewhat unique, that we are witnessing because we have expanded the Medicaid program is that you are actually starting to 

drive the Medicaid program closer to looking like what we see in 

the commercial market. That means both on the issues related to 

the networks that they have, which tended to be much—very different than what we saw in the commercial market. And certainly, 

as we have all heard if you’re in an elected position in particular, 

you look at the kind of rates that Medicaid offers to providers being 

considerably lower than what it is in the commercial market. 

We are starting to see that driven together. I think it inevitably 

has to. You cannot have the Medicaid market significantly underpricing what it offers to providers, and not see that, in effect, almost being one where the commercial market is having to subsidize 

the Medicaid market. Public programs and the commercial market 

have to operate on a level playing field. And we are seeing—starting to see that driven together in ways that we hadn’t before. 

But I believe that the real driver here is expansion of the Medicaid program that has done it. Before this time, we had very little 

limited interaction with the Medicaid program operated by the 

State. Now we have routine meetings talking about networks, talking about rates, and issues like that. 

So I think it is having a beneficial effect that kind of goes outside 

of just what expansion itself would have been maybe the focus of 

discussion. It is actually, I think, helping medicinally to make sure 

that more people are insured, and you don’t have this huge problem of uncompensated care happening, which obviously gets shifted 

then to other payers. 

Chairman ROSKAM. You know, any insight that you have on 

your experience, if you or your staff would be willing to share that 

with us, I think it would be helpful. So thank you. 

Mr. KREIDLER. Thank you, sir. 


joloto on DSKB35BYQ1 with HEARING
77 

Chairman ROSKAM. Mr. Chandler, let’s close out with you. I 

thought your insight as it relates to—the way I put it down in my 

notes when you were talking was the Affordable Care Act deals 

with—with a symptom, but not the cause. Systematically, health 

insurance rates are spiraling, but it doesn’t deal with healthcare 

costs. 

What insight do you have moving forward, if you could hit a 

reset button, how would you focus in? And you heard my rhetorical 

answer to Representative Crowley when he was saying, what are 

we doing? And are we nostalgic about the past? No. There is nobody that is defending the past. There is nobody that is celebrating 

about various structural weaknesses and so forth. But if you had 

an opportunity to hit a reset button and focus in and say how do 

we actually do this, where would you direct the Congress as it relates to dealing with healthcare costs, which, as a foundational 

point, if you have got that under control, you are well on your way 

to an actual remedy? 

Mr. CHANDLER. Let me talk about two points, one big, one 

small. The big point is there may be some temptation on the part 

of Congress to regulate more, push it down, push it down. That is 

unlikely to be effective. That is, adding additional complexity to the 

system which we are already seeing, is going to drive costs up. It 

is going to lead to more gaming behavior and more diversion of resources into how to beat the Federal Government. 

What we have in health care is a unique situation in which the 

consumer is basically taken out of the equation, and instead, health 

care is mediated by insurers who may or may not have the best interest of the patient at heart, and who may not have an interest 

in trying to figure out creative ways using technology and other 

means to drive down healthcare costs. 

And so one of the things I would urge you to look at, and I know 

this is abhorrent to some Members, but I really believe you ought 

to look at consumer-driven health care so that we get probably the 

most powerful force that you have, which is individual greed, and 

individual desire to take care of one’s self and one’s family driving 

down healthcare costs. 

Let me give you my second little point. You may have an opportunity, for better or worse, to renegotiate the Affordable Care Act 

in the coming weeks. I would urge both sides of the aisle to take 

a serious look at that employer mandate. What it is doing is it is 

keeping people out of the individual exchanges, keeping healthy 

people out of the individual exchanges. If you want to stabilize 

them, if you believe—if you happen to believe in the principles of 

the Affordable Care Act, those are the very people that you want 

in those individual exchanges so that we do not see an adverse selection death spiral. 

If you also believe in free market principles, you ought to think 

why is it that we should be forcing employers to divert resources 

into the provision of health care rather, in some instances, into the 

provision of things that employees may value more, like a higher 

paycheck with which to pay rent and buy fresh food, and go to 

parks and engage in other activities that may be more likely to improve their health. 


joloto on DSKB35BYQ1 with HEARING
78 

And so it strikes me that there is an opportunity—and I grant 

you, this is not the biggest issue on earth—but there is an opportunity to do some good here in an area which if people really rethought it and took the blinders and ideology off, there is some 

room for gain. 

Chairman ROSKAM. Mr. Chandler, Mr. Kreidler, Ms. McPeak, 

and Mr. Redmer, we are deeply grateful for your time and your attention today. I know I speak for every member here, we value 

your insight and your willingness to share it with us. And lo and 

behold, let the record reflect that the United States Congress had 

a hearing on the Affordable Care Act, also known as ObamaCare, 

that actually happened to shed more light than heat, thanks be to 

God. So with that, the meeting is adjourned. 

[Whereupon, at 12:02 p.m., the subcommittee was adjourned.] 

[Submission for the record follows:] 


joloto on DSKB35BYQ1 with HEARING
79 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.039
80 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.040
81 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.041
82 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.042
83 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.043
84 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.044
85 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.045
86 

Æ 


joloto on DSKB35BYQ1 with HEARINGInsert 22147.046