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INSURANCE OVERSIGHT 

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INVESTIGATIONS 

OF THE

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COMMERCE 

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ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

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Serial No. 112–7 

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COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE MYRICK, North Carolina 

Vice Chair 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN BILBRAY, California 

CHARLIE BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

BOB LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

JANE HARMAN, California 

JAN SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

(II) 

(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

CLIFF STEARNS, Florida 

Chairman 

SUE MYRICK, North Carolina 

MARSHA BLACKBURN, Tennessee 

LEE TERRY, Nebraska 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

BRIAN BILBRAY, California 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

CORY GARDNER, Colorado 

MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JAN SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

EDWARD J. MARKEY, Massachusetts 

GENE GREEN, Texas 

CHARLES A. GONZALEZ, Texas 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 1 

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

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

California, opening statement ............................................................................. 5 

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

Hon. Cory Gardner, a Representative in Congress from the State of Colorado, 

prepared statement .............................................................................................. 10 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 11 

Prepared statement .......................................................................................... 12 

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

prepared statement .............................................................................................. 77 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 78 

WITNESSES

Steve Larsen, Deputy Administrator and Director, Center for Consumer Information and Insurance Oversight, Centers for Medicare and Medicaid Services, Department of Health and Human Services ............................................. 14 

Prepared statement .......................................................................................... 17 

Jay Angoff, Senior Advisor, Office of the Secretary, Department of Health 

and Human Services ............................................................................................ 26 

Prepared statement 1 ........................................................................................

SUBMITTED MATERIAL

Letter of February 15, 2011 from the American Heart Association, submitted 

by Mr. Waxman .................................................................................................... 80 

Letter of February 15, 2011 from the the American Cancer Society, submitted 

by Ms. DeGette ..................................................................................................... 81 

Subcommittee exhibit binder .................................................................................. 83 

Letter of support from the Hemophilia Federation of America, submitted 

by Mr. Stearns ...................................................................................................... 332 

1 Mr. Angoff did not submit a prepared statement. 

(1) 

HEALTH CARE ISSUES INVOLVING THE CENTER FOR CONSUMER INFORMATION AND 

INSURANCE OVERSIGHT 

WEDNESDAY, FEBRUARY 16, 2011 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 9:30 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Cliff Stearns 

(chairman of the subcommittee) presiding. 

Members present: Representatives Stearns, Sullivan, Murphy, 

Burgess, Blackburn, Myrick, Gingrey, Scalise, Gardner, Griffith, 

Barton, DeGette, Schakowsky, Weiner, Green, Dingell, and Waxman (ex officio). 

Staff present: Caroline Basile, Staff Assistant; Mike Bloomquist, 

Deputy General Counsel; Allison Busbee, Legislative Clerk; Karen 

Christian, Counsel, Oversight; Stacy Cline, Counsel, Oversight; 

Howard Cohen, Chief Health Counsel; Julie Goon, Health Policy 

Advisor; Todd Harrison, Chief Counsel, Oversight/Investigations; 

Sean Hayes, Counsel, Oversight/Investigation; Ruth Saunders, 

Detailee, ICE; Alan Slobodin, Deputy Chief Counsel, Oversight; 

Sam Spector, Counsel, Oversight; John Stone, Associate Counsel; 

Tim Torres, Deputy IT Director; Lyn Walker, Coordinator, Administration/Health Resources. 

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. STEARNS. We convene this hearing of the subcommittee on 

Oversight and Investigation today to gather information on the entity responsible for overseeing the Administration’s changes to the 

private insurance market, the Center for Consumer Information 

and Insurance Oversight. 

It has been nearly a year since the health care law was enacted, 

and this is the first hearing this subcommittee has had since passage of the law devoted exclusively to its effects. This Center is responsible for the massive changes being made by the Administration to the private insurance market. It is responsible for new insurance market rules, the temporary high-risk pools, new medical 

loss ratio rules, and will assist States in implementing the massive 

new regulatory burdens imposed by the Administration. 

Our witnesses today are a former Director of the Center and the 

current one, Mr. Jay Angoff, who ran the office from its inception 

2 

after the passage of the bill until earlier this year. We know very 

little about the creation of this office, and I hope this hearing this 

morning will finally shine some light on how this office was, in fact, 

created, how it is simply organized, and why it is recently moved 

from HHS to CMS on literally, literally the day the Republicans 

took the majority in the 112th Congress. Just a coincidence I am 

sure. 

We also know little about how this office is funded. Is it paid for 

out of the Health Care Law that was signed last year? Is HHS taking money from another program? So we know very little, and what 

we do know has not made a favorable impression on us, perhaps 

because we don’t understand. 

Last year the New York Times reported, ‘‘In Bethesda, Maryland, 

more than 200 health regulators working on complicated insurance 

rules have taken over three floors of a suburban office building, 

paying almost double the market rate for the space in their rush 

to get started.’’ So I hope the Administration and its regulators are 

better at writing regulations than perhaps writing leases. 

Our other witness is Mr. Steve Larsen. Mr. Larsen was recently 

promoted to Director of the Center and had previously served in 

the Center’s Office of Oversight, the office that was responsible for 

granting waivers from the Obama Administration’s Health Care. I 

think it is an understatement to say that these waivers have been 

controversial. 

The Administration’s Health Care Plan was sold as all benefit 

and no downside, so when the public began hearing that while they 

would have to comply with all the new regulations and costs while 

other individuals would get waivers from the Administration and 

thus not have to comply and bear the same burdens, obviously they 

weren’t happy. After all, they were promised that if they like their 

coverage, they could keep it. We heard this mantra over and over 

again. If you like your coverage, you can keep it. 

They were promised lower premiums. They were promised lower 

costs, so simply what did they get? Lost coverage, higher premiums, and higher costs in our opinion, and when the damaging 

effects of the Administration’s Health Care Plan got so bad that 

people were starting to notice, then it was time for waivers. The 

promises made by supporters of the law just simply have not come 

true. 

The Chief Actuary for the Centers for Medicare and Medicaid 

Services recently testified that the law will likely not hold down 

costs. He went on to say that not everyone will be able to keep 

their coverage, even if they like it. Meanwhile, the adverse effects 

of the law on the private sector have been undeniable. Companies 

are considering dropping coverage, insurers are opting to exit from 

the market, and consumers are left with fewer options, in fact. And 

of those options available the premiums continue to rise thanks to 

the costly mandates and regulations in Obamacare. 

It certainly doesn’t get any better when you look at how the government is handling this Health Care Bill. Last month this subcommittee’s hearing on the need for regulatory reform highlighted 

how numerous regulations in the Health Care Bill have been 

issued without even public comment. If an idea is controversial and 

lacks popular support, like end-of-life counseling, for example, then 

3 

it simply sneaks into the regulations in the hope that nobody will 

notice. No comment period. Just happens to appear. 

So today, my colleagues, we will hear testimony about why so 

many companies and insurers need to be excluded, given waivers 

from this great Health Care Bill that the Administration has touted. Ironically, considering that if you listened to the Administration 

for the last 2 years, you would wonder why anyone would ever 

need to be protected from this law, yet today we have learned that 

over two and a half million people have been exempted from the 

Administration’s Health Care Plan through these waivers. Two and 

a half million people need to literally, literally be protected from 

the devastating effects of the Health Care Bill the Administration 

has passed. Yes, protected. 

Under the very standards determining whether a waiver will be 

granted, a company or insurer needs to show that unless a waiver 

was granted, beneficiaries were either going to face significant premium increases or a significant reduction in access to benefits. So 

we will hear today that these waivers are necessary because the 

plans they affect offer little coverage. We will likely hear at length 

today that the reason it is OK to give out these waivers is because 

in 2014, the exchanges will finally provide low-cost, quality health 

care, yet nearly every promise made about Obamacare has been 

broken. 

During the debate on health care our party offered many solutions to expand access to health care services without raising costs 

or bankrupting the country. They were not passed. They were ignored. So I am hopeful today that we begin to examine the effects 

of the Administration’s Health Care Bill. Americans from both parties will begin to see the value in our ideas, ideas that rely on commonsense and free-market solutions and perhaps not on decisions 

that are made by the federal bureaucracy. 

I am very interested in the testimony we will hear today, because 

this Center is responsible for many of the changes in the Administration’s Health Care Bill that it makes to the private insurance 

market, and I hope our witnesses will shine some light on the reasons for these changes. I know this is a busy season for them, so 

I appreciate them coming up here especially with the budget process and the budget being released this week. So I thank them sincerely for their time. 

Today marks the beginning of what the public voted for in 2010, 

real and sustained oversight of the federal takeover of the health 

care industry, and with that I recognize distinguished colleague, 

Ms. DeGette. 

[The prepared statement of Mr. Stearns follows:] 

PREPARED STATEMENT OF HON. CLIFF STEARNS

We convene this hearing of the Subcommittee on Oversight and Investigations 

today to gather information on the entity responsible for overseeing the Administration’s changes to the private insurance market—The Center for Consumer Information and Insurance Oversight. It has been nearly a year since the health care law 

was enacted, and this is the first hearing this subcommittee has had since passage 

of the law devoted exclusively to its effects. 

This Center is responsible for the massive changes being made by Obamacare to 

the private insurance market. It is responsible for new insurance market rules, the 

temporary high risk pools, new medical loss ratio rules, and will assist states in imVerDate Nov 24 2008 14:18 May 18, 2011 Jkt 037690 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-7 021611\112-7 CHRIS
4 

plementing the massive new regulatory burdens imposed by Obamacare. Our witnesses today are the former Director of the Center and the current one—Mr. Jay 

Angoff ran the office from its inception after the passage of Obamacare until earlier 

this year. We know very little about the creation of this office, and I hope this hearing will finally shine some light on how this office was created, how it is organized, 

and why it was moved from HHS to CMS on literally the day Republicans took the 

majority in the 112th Congress. 

We also know little about how this office is funded—is it paid for out of the health 

care law signed last year? Is HHS taking money from another program? We know 

very little, and what we do know has not made a good impression. Last year the 

New York Times reported: ‘‘In Bethesda, Maryland, more than 200 health regulators 

working on complicated insurance rules have taken over three floors of a suburban 

office building, paying almost double the market rate for the space in their rush to 

get started.’’ I hope Obamacare’s regulators are better at writing regulations than 

writing leases. 

Our other witness is Mr. Steve Larsen, Mr. Larsen was recently promoted to Director of the Center, and had previously served in the Center’s Office of Oversight— 

the office that was responsible for granting waivers from Obamacare. 

I think it is an understatement to say that these waivers have been controversial. 

Obamacare was sold as all benefit—no downside. So when the public began hearing 

that while they would have to comply with all of the new regulations and costs, 

while other individuals would get waivers from the Administration and thus not 

have to comply and bear the same burdens, they weren’t happy. 

After all, they were promised that if they like their coverage, they could keep it. 

They were promised lower premiums. They were promised lower costs. What did 

they get? Lost coverage. Higher premiums. Higher costs. And when the damaging 

effects of Obamacare got so bad that people were starting to notice? Then it was 

time for waivers. 

The promises made by supporters of the law have not come true. The Chief Actuary for the Center for Medicare and Medicaid Services recently testified that the law 

will likely not hold down costs. He went on to say that not everyone will be able 

to keep their coverage, even if they like it. Meanwhile, the adverse effects of the 

law on the private sector have been undeniable: companies are considering dropping 

coverage, insurers are opting to exit from the market, and consumers are left with 

fewer options—and of those options available, the premiums continue to rise, thanks 

to the costly mandates and regulations in Obamacare. 

It certainly doesn’t get any better when you look at how the government is handling Obamacare. Last month this subcommittee’s hearing on the need for regulatory reform highlighted how numerous regulations in Obamacare have been issued 

without public comment. If an idea is controversial and lacks popular support, like 

end of life counseling, then it is simply snuck into a regulation in the hope that nobody will notice. 

Today we will hear testimony about why so many companies and insurers need 

to be excluded from the effects of Obamacare—ironic, considering that if you listened to the Administration for the last 2 years you’d wonder why anyone would 

ever need to be protected from this law—yet today we learn that 2.5 million people 

have been exempted from Obamacare through these waivers. 2.5 million people need 

to literally be protected from the devastating effects of Obamacare. 

Yes, protected. Under the very standards determining whether a waiver will be 

granted, a company or insurer needed to show that unless a waiver was granted, 

beneficiaries were either going to face a ‘‘significant’’ premium increase or a ‘‘significant’’ reduction in access to benefits. 

We will hear today that these waivers are necessary because the plans they affect 

offer little coverage. We will likely hear at length today that the reason it is ok to 

give out these waivers is because in 2014, the exchanges will finally provide low 

cost, quality health care. Yet, nearly every promise made about Obamacare has been 

broken. 

During the debate on health care, our party offered many solutions to expand access to health care services without raising costs or bankrupting the country. We 

were ignored then. I am hopeful that as we begin to examine the terrible effects 

of Obamacare, Americans from all parties will begin to see the value in our ideas— 

ideas that rely on commonsense and free market solutions, not on decisions made 

by the federal bureaucracy. 

I am very interested in the testimony we will hear today because this Center is 

responsible for many of the changes Obamacare makes to the private insurance 

market, and I hope our witnesses will shine some light on the reason for those 

changes. 

5 

I know that this is a busy season for them, especially with the budget being released this week, and I thank them for their time. 

Today marks the beginning of what the public voted for in 2010: real and sustained oversight of the federal takeover of the healthcare industry. 

I recognize, with pleasure, the Ranking Member, Ms. DeGette. 

Ms. DEGETTE. Mr. Chairman, out of deference to the two hearings this morning, I am going to defer to the ranking member to 

make his opening statement first. 

Mr. STEARNS. Mr. Waxman is recognized. 

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

Mr. WAXMAN. Thank you very much. I am a strong believer in 

effective oversight. It is essential to assure that the laws passed by 

Congress are implemented in the most effective and efficient way 

possible, and that is why I support oversight of the Affordable Care 

Act. 

The Health Reform Law passed by Congress, signed into law by 

President Obama last year, provides tremendous benefits. Insurers 

are banned from discriminating against children with pre-existing 

conditions. Seniors are already benefiting from lower drug prices. 

Small businesses are getting tax cuts to pay for health insurance. 

The law has benefits for all Americans, and we ought to be doing 

what we can to make sure the Administration is implementing the 

law appropriately. 

But I am concerned, Mr. Chairman, that this committee is using 

oversight as another means of blocking the implementation of the 

law. Over the last few weeks the committee issued a broad document request to the Department of Health and Human Services 

that require massive document searches for no apparent purpose. 

Already HHS has provided over 50,000 pages of documents in response to these requests. And already we are seeing Republican 

leaders make unsubstantiated allegations that wrongly accuse the 

Department of misconduct and mismanagement. Before they have 

even had the hearing and gotten the facts Republicans are telling 

us that the law has failed, and I believe that it is not true. 

The subject of today’s hearing is the formation of the HHS Center for Consumer Information and Insurance. This group within 

CMS has provided insurers from a provision of the Health Care 

Bill banning annual limits on health care coverage. The insurers 

are saying unless they get some of these waivers, the price of the 

insurance will go up before we get to the period of 2014, or the 

availability of the insurance will not be as much as it has been in 

the past. So we wrote into the law that we wanted the Department 

to give these waivers, at least until 2014, when the law will be 

fully in effect. 

Our subcommittee chairman has asserted that the granting of 

these waivers show that health care reform is flawed. ‘‘If the law 

is so good, why are so many waivers to the law being granted.’’ 

Senator Orrin Hatch decried the lack of transparency. Oversight 

Chairman Darrell Issa has asserted that unions have received special treatment because, ‘‘Bureaucrats are picking winners and losVerDate Nov 24 2008 14:18 May 18, 2011 Jkt 037690 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-7 021611\112-7 CHRIS
6 

ers in a politicized environment where the winners are favored constituencies of the Administration.’’ 

But let us look at the facts. The waiver process has been transparent and efficient. HHS put out an interim final rule, three sets 

of guidance, and worked individually with each applicant to resolve 

any problem with waiver requests. Over 90 percent of all entities 

that applied for waivers were approved. The average wait time for 

approval of a completed waiver request was only 13 days. The process has been fair. 

Contrary to Chairman Issa, there has been no favoritism to 

unions. The information HHS has provided to the committee shows 

that plans that serve union employees were almost five times as 

likely to have their waivers denied as non-union plans. Nine of the 

last ten largest applicants to be denied waivers were plans that 

provided care for union members. 

The law and waiver process are designed to accommodate plans 

with low annual limits known as limited benefit plans or mini-med 

plans. These plans either have a set limit of dollars that they will 

spend on benefits or a limited amount of benefits that may be received or a cap on specific benefits. These are plans that by 2014 

will no longer be able to do what they are doing because in 2014, 

all plans are going to have to cover the minimum health insurance 

package. They will not be able to discriminate on the basis of preexisting conditions, and consumers and small businesses will have 

improved access to affordable care through no health insurance exchanges. 

The waivers are intended to provide a smooth transition between 

now and 2014. They affect a small population, less than 2 percent 

of all Americans with employer-based coverage, but for this group 

they provided valuable interim relief. 

The Democratic staff has prepared an analysis of the waiver 

process that documents its success, and I ask this analysis be made 

part of today’s hearing record. 

I was the ranking member of the Oversight Committee when 

Dan Burton was Chairman, and during that time President Clinton 

was in office. No allegation was too wild for him not to pursue. The 

committee would demand thousands of documents, take up hundreds of hours of taxpayer’s time in investigations that cost taxpayers millions of dollars, all with no regard for the basic facts of 

the case. 

An allegation would come out before they got the information, 

and then when the information came out disproving the allegation, 

they were already ready for another allegation. They moved 1 day 

to the next with attacks, attacks, attacks. 

Well, Mr. Chairman, I hope we are not going to see that go on 

in this committee and in this Congress. Let us be fair, let us get 

the facts, and let us see what the reality is before we make any 

of these accusations that I have been hearing. 

I yield back the balance of my time. 

[The prepared statement of Mr. Waxman follows:] 

7 

PREPARED STATEMENT OF HON. HENRY A. WAXMAN

Mr. Chairman, I am a strong believer in effective oversight. It is essential to ensuring that the laws passed by Congress are implemented in the most effective and 

efficient way possible. That is why I support oversight of the Affordable Care Act. 

The health reform law passed by Congress and signed into law by President 

Obama last year provides tremendous benefits. Insurers are banned from discriminating against children with pre-existing conditions. Seniors are already benefitting 

from lower drug prices. Small businesses are already getting tax cuts to pay for 

health insurance. The law has benefits for all Americans—and we ought to be doing 

what we can to make sure the Administration is implementing the law appropriately. 

But I am concerned that this Committee is using oversight as another means of 

blocking implementation of the law. Over the last few weeks, the Committee issued 

broad document requests to the Department of Health and Human Services (HHS) 

that require massive document searches for no apparent purpose. Already HHS has 

produced over 50,000 pages of documents in response to these requests. 

And already we are seeing Republican leaders make unsubstantiated allegations 

that wrongly accuse the Department of misconduct and mismanagement. 

The subject of today’s hearing is the formation of HHS’s Center for Consumer Information and Insurance Oversight and the waivers that CCIIO has provided insurers from a provision of the health care bill banning annual limits on health care 

coverage. 

The Subcommittee Chairman has asserted that the granting of these waivers 

shows that the health care reform effort is flawed: ‘‘If the law is so good, why are 

so many waivers to the law being granted?’’ Senator Orrin Hatch has decried ‘‘the 

lack of transparency which has surrounded the waiver process.’’ Oversight Chairman Darryl Issa has asserted that unions have received special treatment because 

‘‘bureaucrats are picking winners and losers in a politicized environment where the 

winners are favored constituencies of the administration.’’ 

But let’s look at the facts. 

The waiver process has been transparent and efficient. HHS put out an interim 

final rule, three sets of guidance, and worked individually with each applicant to 

resolve any problem with waiver requests. Over 90% of all entities that applied for 

waivers were approved. The average wait time for approval of a completed waiver 

request was only 13 days. 

The process has also been fair. Contrary to Chairman Issa, there has been no favoritism to unions. The information HHS has produced to the Committee shows that 

plans that serve union employees were almost five times as likely to have their 

waivers denied as non-union plans. Nine of the ten largest applicants to be denied 

waivers were plans that provided care for union members. 

The law and the waiver process are designed to accommodate plans with low annual limits known as ‘‘limited benefit plans’’ or ‘‘mini-med’’ plans. These plans either 

have a set limit on dollar amounts of benefits that may be received or cap specific 

benefits. 

In 2014 these plans will be unnecessary: all Americans will have improved health 

care coverage because insurers will no longer be able to discriminate on the basis 

of pre-existing conditions, and consumers and small businesses will have improved 

access to affordable care through new health insurance exchanges. 

The waivers are intended to provide a smooth transition between now and 2014. 

They affect a small population—less than 2% of all Americans with employer-based 

coverage—but for this group they provided valuable interim relief. 

Rather than indicating a flaw in the law, the waiver process shows HHS is implementing health reform in a way that helps consumers keep their plans without imposing undue burdens on insurers or risking loss of coverage. 

The Democratic staff has prepared an analysis of the waiver process that documents its success. I ask that this analysis be made part of today’s hearing record. 

I was ranking member of the Oversight Committee when then Chairman Dan 

Burton ran amok investigating our last Democratic President. No allegation was too 

wild to pursue. The Committee would demand thousands of documents, and take 

up hundreds of hours of taxpayer time in investigations that cost taxpayers millions 

of dollars—all with no regard for the basic facts of the case. 

I hope this is not happening here. When we hold oversight hearings, we should 

do so because we want to make sure that federal agencies are doing their jobs. We 

should not hold hearings to stop the vital work of government. And we should not 

hold hearings because the new Republican majority wants to disrupt the health care 

reform law. 

8 

As we conduct oversight on the law, I hope we will put partisanship aside and 

do the kind of thorough and fair investigations that have been the hallmark of this 

Committee. 

And if we do that, the American people will see there is good news about the 

health care reform law and the ways it is helping all Americans. 

Mr. STEARNS. Yields back the balance of his time and I recognize 

the gentlelady from Tennessee for 2 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. I welcome our witnesses today. We have been waiting a long time to ask these questions that we have for you, and reading your prepared remarks I 

think we would all be led to believe that this has been an unqualified success in its rollout. You talk a lot about benefits, but you 

don’t talk a lot about expected costs, and we will want to talk with 

you about that. 

I want to go to the waivers because there have been some 900 

health plans that have been given waivers, and we will discuss 

those waivers as we move forward. I think we are going to want 

to know what happens in 2013, and 2014, when those companies 

are not able to get waivers. These waivers gave relief to some plans 

but will happen to—we want to know what is going to happen 

when the other mandates of Obamacare are phased in, and it 

seems to me that these are 900 new stories that the Administration 

probably is wanting to avoid because private sector plans that are 

working for people, they don’t want to come under Obamacare. And 

so they are coming to you to get a waiver. 

In Tennessee we have been down this costly road before, and Mr. 

Chairman, I have some charts on what happened in Tennessee that 

I would like to submit for the record. 

As I have repeatedly stated in this committee, TennCare gave 

unlimited access to care, it incentivized use rather than controlled 

costs, it reached the point of consuming 35.3 percent of the State 

budget. That was in 2005. Nearly bankrupted the State, so I am 

going to want to know if you are using history as a guide, what 

is your plan for dealing with cost acceleration which comes on you 

very quickly if you look at the TennCare model which is the closest 

thing in this country to what you have. 

Even our former governor, a Democrat, Phil Bredesen, did a lot 

to rein in exploding costs, implementing a program, but, there 

again, we saw what happened in our State. 

I thank you, Mr. Chairman. I yield back. 

Mr. STEARNS. And I thank the gentlelady. Recognize Dr. Burgess 

for 1 minute. 

Dr. BURGESS. For 1 minute? 

Mr. STEARNS. We are going to go 1 minute to Mr. Burgess, 1 

minute to Mr. Gardner, and 1 minute to Mr. Barton. 

Dr. BURGESS. All right. Very well. Then let me just welcome our 

witnesses. It is good to see you again, Mr. Angoff. We had a nice 

visit last November. This is an issue that has been of great interest 

to me for quite some time. In fact, you were known by a different 

acronym when I met with you and, now I followed with interest 

that there have been some changes within the agency, and whether 

those are good or bad remains to be determined. 

Mr. Waxman spoke eloquently of the problems that he saw in a 

previous Congress, but let me just allude to the problems that I 

9 

saw in the last Congress when we decided to be indifferent to oversight and not even ask a simple question. We passed this law in 

my opinion in a way that was poorly done, and then your agency, 

within the agency was set up with very little notice to the Congress. No one knew you were here, no one knew how much money 

you were spending, where it was coming from, and then we find 

out that in order for the Patient Protection and Affordable Care Act 

to work you had to give two and a half million people waivers. 

Well, it doesn’t sound to me like the definition of a good solid foundation. 

So I am grateful that we are doing the oversight now, grateful 

to the subcommittee chairman for calling this hearing. I wish we 

could have done this several months ago. I think it would have 

helped all of us, but thank you, Mr. Chairman. I will yield back. 

Mr. STEARNS. Thank the gentleman, and Mr. Gardner, you are 

recognized for 1 minute. 

Mr. GARDNER. Thank you, Mr. Chairman, and the witnesses for 

attending today for convening our first hearing, oversight hearing, 

on the Patient Protection and Affordable Care Act. 

A lot of promises have been made about health care reform. 

Costs would be lower, people would have better access to health 

care. If people liked their coverage, they could keep it. Those promises are not being kept. 

The waivers issued by HHS exempting health plans from the 

prohibition on annual or lifetime benefits or lifetime limits on benefits is a good case study. Over 900 health plans would have been 

forced to reduce benefits, raise costs to their enrollees, or drop the 

plans altogether because complying with the requirements of the 

Health Care Bill was just too expensive. 

Even worse, these waivers are simply postponing reality. What 

will happen as other requirements of the law are phased in and 

health care plans, health plans are not able to comply with those 

further financial burdens? This is why this committee’s investigation of the bill is so timely in the Center for Consumer Information 

and Insurance Oversight. We cannot wait until the exchanges are 

up and running to discover that they are not working. Congress 

can’t stick its head in the sand and deny the law of economics. 

Companies that need waivers today will not suddenly be able to 

provide even more required benefits in 2012, when the Health Care 

Bill fully kicks in. 

Many of the assumptions that are underpinning the Health Care 

Bill have proven to be false. For instance, it was estimated that 

375,000 people would enroll in the high-risk pools. Instead, only 

12,000 people enrolled. Recent articles and the news have discussed the increasingly unbearable burden that Medicaid places on 

State budgets. Medicaid is 21 percent of total State spending and 

annual spending growth on the program doubled between 2008, 

and 2009. 

I am excited to get to work on this. I believe we have a lot of 

work to do and look forward to hearing from you before we end up 

bankrupting this country. 

[The prepared statement of Mr. Gardner follows:] 

10 

PREPARED STATEMENT OF HON. CORY GARDNER

Thank you, Mr. Chairman, for convening our first oversight hearing on the Patient Protection and Affordable Care Act. 

A lot of promises have been made about health care reform. Costs would be lower. 

People would have better access to health care. If people liked their coverage, they 

could keep it. Those promises are not being kept. 

The waivers issued by HHS exempting health plans from the prohibition on annual or lifetime limits on benefits is a good case study. Over 900 health plans would 

have been forced to reduce benefits, raise costs to their enrollees, or drop the plans 

altogether because complying with the requirements of Obamacare was just too expensive. Even worse, these waivers are simply postponing reality. What will happen 

as other requirements of the law are phased in, and health plans are not able to 

comply with those further financial burdens? 

This is why this Committee’s investigation of Obamacare, and the manner in 

which it is being implemented by the Center for Consumer Information and Insurance Oversight is long overdue. We cannot wait until the exchanges are up and running in 2014 to realize that this system is not working. You cannot stick your head 

in the sand and deny the laws of economics forever. Companies that need waivers 

from Obamacare’s requirements today will not suddenly be able to provide even 

more required benefits in 2012, when Obamacare fully kicks in. Many of the assumptions underpinning Obamacare have been proven to be false. 

For instance, it was estimated that 375,000 people would enroll in the high-risk 

pools. Instead, only 12,000 enrolled. Recent articles in the news have discussed the 

increasingly unbearable burden that Medicaid places on state budgets. Medicaid is 

21 percent of total state spending, and annual spending growth on the program doubled between 2008 and 2009. And yet this health care reform law would essentially 

add 20 million more people to the Medicaid rolls in 2014. These are simply 

unsustainable burdens, and if they are not fixed, they will break the world’s greatest health care system and bankrupt this country. We need to fix this problem. 

I am ready to get to work on this issue. I thank the witnesses for being here, and 

I yield back the balance of my time. 

Mr. STEARNS. I thank my colleague and the distinguished chairman emeritus, Mr. Barton. 

Mr. BARTON. Thank you, Mr. Chairman. I will put my formal 

statement in the record. 

Today’s hearing is the first of many, but I think it is telling, Mr. 

Chairman, that we are here today with an oversight hearing over 

an organization that is not explicitly authorized in the Act, whose 

job is to give waivers to a law that supposedly is going to lower 

costs, but the very reason they are giving waivers is because the 

cost of complying with the law is so large that over 900 companies 

or 900 insurance plans have been given waivers because they could 

not comply if they had to honor what the law said. 

So this is going to be a good hearing. I appreciate each of you 

two gentlemen being here, and I will try to participate some, Mr. 

Chairman, but as you know, we have the FCC Commission downstairs simultaneously. So some of us have to try to be two places 

at one time, which is—— 

Mr. STEARNS. I appreciate your—— 

Mr. BARTON. Thank you, Mr. Chairman. 

Mr. STEARNS [continuing]. Staying here. 

Mr. BARTON. Thank our witnesses. 

Mr. STEARNS. Thank you. The gentlelady, Ms. DeGette, is recognized. 

11 

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

Ms. DEGETTE. Thank you very much, Mr. Chairman. 

Last year President Obama signed into law landmark health reform legislation to improve health care access for millions of American families and small business owners, prohibit abusive insurance practices, and to reduce our Nation’s deficit. Today’s hearing 

is focused on implementation of the law’s prohibition on annual 

and lifetime limits on health care coverage, an important consumer 

protection that prevents people with chronic or catastrophic illnesses from losing their coverage after they reach an arbitrary cap 

on expenses established by their insurer. 

This is a provision that is already protecting consumers and will 

protect millions more individuals with chronic and expensive diseases like diabetes, and it is widely supported. 

Mr. Chairman, I would like to insert into the record letters from 

the American Cancer Society and the American Heart Association 

about the importance of this provision. 

Mr. STEARNS. By unanimous consent, so ordered. 

Ms. DEGETTE. Thank you. 

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

Ms. DEGETTE. We are transitioning to this new policy, and millions of Americans with insurance are benefiting immediately, but 

a small percentage of insured Americans are in plans that will 

need waivers from these provisions until the Health Care Bill takes 

effect in its entirety in 2014. The law allows for those waivers 

which are the subject of today’s hearing. 

And, Mr. Chairman, you noted that two-and-a-half million people 

are subject to these waivers, but I would point out that is two-anda-half million out of 164 million, which is less than 2 percent of the 

market. 

The Center for Consumer Information and Insurance Oversight 

is responsible for implementing the consumer protections against 

insurers’ annual limits. CCL announced that that process in a public role last summer and issued further guidance based on input 

from affected entities. CCO is granting waivers to this provision in 

cases where insurance providers show that compliance, ‘‘would result in a significant decrease in access to benefits,’’ or, ‘‘would significantly increase premiums.’’ 

Republicans on this committee and elsewhere have made a number of allegations about this agency and its process for implementing the ban on annual limits. Senator Kyl and others have 

made statements suggesting that CCO may be providing waivers to 

political allies such as unions, and in fact, Mr. Chairman, you, 

yourself, have suggested that the volume of waivers granted indicates flaws in the Health Reform Law. 

But the information and documents that the committee has received tell a different story. They show that the Administration is 

implementing the law in a fair, transparent, flexible, and efficient 

way. The Administration data shows over 90 percent of applicants 

who sought waivers—I am working on a cold. I will try not to sit 

too close. Ninety percent of the applicants who sought waivers for 

their plans received HHS approval. The average completed applicaVerDate Nov 24 2008 14:18 May 18, 2011 Jkt 037690 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-7 021611\112-7 CHRIS
12 

tion was approved by HHS within 13 days with over one-third approved in under 1 week. 

Now, this is exactly the kind of governmental efficiency that everybody across the aisle should be standing up and applauding. We 

reviewed e-mails that the companies requesting waivers exchanged 

with CMS. Here is—formerly HCFA, by the way. Here is what a 

few of the companies had to say. 

‘‘I want to sincerely thank HHS for working so hard to process 

and approve our waiver application.’’ ‘‘Thanks to you and all the 

staff at CCIIO for your consideration and effort.’’ ‘‘We just want to 

thank you for the prompt and courteous service you gave these applications.’’ 

Mr. Chairman, these don’t sound like businesses that are overburdened and fearful of government regulation. They sound like 

satisfied clients. 

As for the claim of bias towards unions, the data received by the 

committee shows that the plans that serve union employees were 

almost five times more likely than average to be denied waivers. 

If the Administration is somehow biased in favor of unions, that 

frankly is a pretty strange way of showing it. 

In the subcommittee’s first hearing we learned from the Administration how the President’s executive order on regulations has instructed agencies to implement laws in a manner that protects consumers while imposing the least burden possible on business. The 

implementation of the Annual Limits Provision provides a case in 

point in how the Administration is acting on those principles. 

The plans that are receiving waivers need improvement. They 

are often so-called mini-med plans that offer limited benefits. In 

2014, thanks to the new Health Care Bill almost all Americans will 

get better coverage than this, but for now these limited plans are 

the best coverage available for many of these workers, and the 

waiver process accommodates business and insurers so that consumers can retain access to these plans in bridge years. 

Based on clear regulation and guidance CCO evaluates waiver 

requests on clearly-explained criteria such as premium changes in 

percentage terms and dollar terms, the number and type of benefits 

affected by the annual limits, and the number of enrollees under 

the plan seeking the waivers. Approvals once granted are rapidly 

posted on the HHS Web site. The overall process for implementing 

this important health reform provision and the waiver provisions 

within it embodies the principles that all of us on this committee 

seek in the regulatory process. 

I look forward to hearing from our two witnesses today. I hope 

we can talk about facts and why this is necessary and why it is 

working, and I yield back. 

[The prepared statement of Ms. DeGette follows:] 

PREPARED STATEMENT OF HON. DIANA DEGETTE

Last year, President Obama signed into law landmark health reform legislation 

to improve health care access for millions of American families and small business 

owners, prohibit abusive insurance practices, and reduce our nation’s deficit. Today’s 

hearing is focused on implementation of the law’s prohibition on annual and lifetime 

limits on health care coverage, an important consumer protection that prevents people with chronic or catastrophic illnesses from losing their coverage after they reach 

an arbitrary cap on expenses established by their insurer. 

13 

This is a provision that is already protecting consumers, and will protect millions 

more—individuals with chronic and expensive diseases like diabetes. 

We are transitioning to this new policy, and millions of Americans with insurance 

are benefitting immediately. But a small percentage of insured Americans are in 

plans that will need waivers from these provisions until the health care bill takes 

effect in its entirety in 2014. The law allows for these waivers, which are the subject 

of today’s hearing. 

The Center for Consumer Information and Insurance Oversight, or CCIIO, is responsible for implementing the consumer protections against insurer’s annual limits. CCIIO announced that process in a public rule last summer and issued further 

guidance based on input from affected entities. 

CCIIO is granting waivers to this provision in cases where insurance providers 

show that compliance ‘‘would result in a significant decrease in access to benefits’’ 

or ‘‘would significantly increase premiums.’’ 

Republicans on this committee and elsewhere have made a number of allegations 

about CCIIO and its process for implementing the ban on annual limits. Senator 

Kyl and others have made statements suggesting CCIIO may be providing waivers 

to ‘‘political allies’’ such as unions. The subcommittee chairman has suggested that 

the volume of waivers granted indicates flaws in the health reform law. 

But the information and documents the Committee has received tell a different 

story. They show that the Administration is implementing the law in a fair, transparent, flexible, and efficient way. 

The Administration data show that over 90% of applicants who sought waivers 

for their plans received HHS approval. The average completed application was approved by HHS within 13 days—with over one third approved in under one week. 

This is exactly the kind of government efficiency that my friends across the aisle 

ought to be standing up and applauding. 

We reviewed emails that the companies requesting waivers exchanged with CMS. 

Here’s what a few of the companies had to say: ‘‘I want to sincerely thank HHS.for 

working so hard to process and approve our waiver application.’’ ‘‘Thanks you and 

all the staff at OCIIO for your consideration and effort.’’ ‘‘We just want to thank 

you for the prompt and courteous service you gave these applications.’’ Mr. Chairman, these don’t sound like businesses that are overburdened and fearful of government regulation - they sound like satisfied clients. 

As for the claim of bias toward unions, the data received by the Committee shows 

that plans that serve union employees were almost five times more likely than average to be denied waivers. If the Administration is somehow biased in favor of 

unions, this is a pretty strange way of showing it. 

In the Subcommittee’s first hearing, we learned from the Administration how the 

President’s Executive Order on regulations has instructed agencies to implement 

laws in a manner that protects consumers while imposing the least burden possible 

on business. The implementation of the annual limits provision provides a case in 

point of how the Administration is acting on these principles. 

The plans that are receiving waivers need improvement. They are often so-called 

mini-med plans that offer limited benefits. In 2014, thanks to the health care bill, 

almost all Americans will get better coverage. But for now, these limited plans are 

the best coverage available for many workers—and the waiver process accommodates business and insurers so that consumers can retain access to these plans in 

the bridge years. 

Based on clear regulation and guidance, CCIIO evaluates waiver requests on 

clearly explained criteria, such as premium changes in percentage terms and dollar 

terms, the number and type of benefits affected by the annual limits, and the number of enrollees under the plan seeking the waivers. Approvals, once granted, are 

rapidly posted on the HHS Web site. 

The overall process for implementing this important health reform provision, and 

the waiver provisions within it, embodies the principles that Republicans and Democrats alike seek in the regulatory process. It is fair. It is efficient. It is transparent. 

And it is allowing over two million Americans to keep their existing health insurance coverage. 

I look forward to hearing from our witnesses. I hope we can discuss the facts 

about CCIIO and its waiver process today rather than propagating myths about 

healthcare reform’s implementation. 

Mr. STEARNS. I thank the ranking member, and let me open up 

by saying I ask unanimous consent that the contents of the document binder be introduced into the record subject to any necessary 

redactions by the staff. 

14 

Without objection, the documents will be entered into the record. 

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

Mr. STEARNS. And let me address the two of you before we start 

your opening statement. You are aware that the committee is holding an investigative hearing and when doing so has had the practice of taking testimony under oath. Do you have any objection to 

testifying under oath? 

OK. The Chair also advises both of you that under the rules of 

the House and the rules of the Committee you are entitled to be 

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

your testimony today? 

OK. 

[Witnesses sworn.] 

Mr. STEARNS. You are now under oath and subject to the penalties set forth in Title XVIII, Section 1001, of the United States 

Code. If you would be so kind now as to give us, each of you, your 

5-minute summary of your opening statement. 

Thank you. Mr. Larsen. 

TESTIMONY OF STEVE LARSEN, DEPUTY ADMINISTRATOR 

AND DIRECTOR, CENTER FOR CONSUMER INFORMATION 

AND INSURANCE OVERSIGHT, CENTERS FOR MEDICARE 

AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND 

HUMAN SERVICES; AND JAY ANGOFF, SENIOR ADVISOR, OFFICE OF THE SECRETARY, DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

TESTIMONY OF STEVE LARSEN 

Mr. LARSEN. Mr. Chairman—— 

Mr. STEARNS. I think you need to bring the mike a little closer. 

Mr. LARSEN. Can you hear me now? 

Mr. STEARNS. We can hear you good. Thank you. 

Mr. LARSEN. OK. 

Mr. STEARNS. Thank you, Mr. Larsen. 

Mr. LARSEN. My full testimony has been submitted for the 

record. I serve as Director of the Center for Consumer Information 

and Insurance Oversight within CMS. Since taking on this role I 

have been involved in implementing many of the provisions of the 

Affordable Care Act, ACA, including overseeing private health insurance reforms, establishing the health insurance exchanges, and 

ensuring that consumers have access to information about their 

rights and coverage options. 

Prior to becoming the Director of CCIIO I served as the Director 

of the Office of Oversight within CCIIO, which works with the 

States to implement the new insurance market rules, including the 

new restrictions on annual dollar limits on health insurance benefits. 

As Director of CCIIO I am committed to improving the health insurance system so that it works for consumers now and in 2014, 

when consumers will have more quality health care options. I am 

working to make sure that Americans who have insurance today 

can keep that coverage as we transition to the improved system in 

2014. 

15 

As part of improving the current health insurance system, the 

Affordable Care Act ensures that consumers are provided meaningful and reliable coverage for their premium dollars by phasing in 

restrictions on annual limits and insurance policies between now 

and 2014. This is one of the subjects that you have asked me to 

discuss today. 

Right now over 160 million Americans get their health insurance 

through an employer; however, not all coverage offered by employers is the same. A very small percentage of employees are offered 

policies with low annual limits, caps on the amounts of benefits 

that are provided under the policy in a year. Often, these policies 

are offered by employers who hire lower-wage, part-time, or seasonal workers. 

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

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

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

$25,000 in coverage, but in the case of a serious illness or accident, 

the coverage can be inadequate. 

In 2014, consumers will be able to purchase fuller health insurance coverage in State-based exchanges, competitive marketplaces, 

where consumers and small businesses can shop for private coverage and will have the market power similar to large employers. 

Small businesses with fewer than 25 employees will be eligible for 

tax credits to help pay for their employees’ coverage, and small 

businesses with up to 100 employees in a State will be able to join 

the shop exchanges. 

But in the time between now and 2014, we need to maintain the 

coverage that employees have until better options are available for 

them. For policies with low annual limits, immediate compliance 

with the new Affordable Care Act protections that restrict annual 

limits could cause disruption of this coverage. 

The Affordable Care Act directs the Secretary to implement the 

restrictions on annual limits in a manner that ensures continued 

access to coverage. This is accomplished by phasing in the annual 

restrictions for most policies and for this year we established a 

waiver process for the small percentage of policies that are substantially below the restricted annual limits set in the regulation. 

These waivers only apply to this single provision of the ACA. Insurance companies and employers that receive waivers must comply with all other parts of the Affordable Care Act. Our goal has 

been to implement the law but to do so in a manner consistent 

with the statute and in a way that preserves employees’ coverage 

options until 2014. 

All employers and insurers that offer limited benefit plans may 

apply for a waiver if they demonstrate that there will be a significant increase in premiums or a significant decrease in access to 

coverage without the waiver. Applying for a waiver is simple, a 

basic process that CCIIO clearly published on our Web site. We administer the process fairly without regard to the type of the applicant or size of business. We published our standards for reviewing 

applications in the regulations implementing the law and again in 

the bulletins implementing the regulations. 

16 

The vast majority of waivers were granted to health plans that 

are employer based, more than 95 percent. Of the waivers approved, 47 percent were to self-insured employer plans, 26 to 

HRAs, and 21 percent to Taft-Hartley plans, which are multi-employer plans governed by collective bargaining agreements, and 3 

percent to issuers, insurance companies who provide these policies. 

The limited benefit plans for which waivers are allowed cover an 

extremely small portion of people who have employer-sponsored 

health plans. Since setting up the waiver program CCIIO has 

granted waivers to plans covering approximately 2.4 million people 

out of the 150 million or so who have employer-sponsored health 

coverage. This is less than 2 percent of all covered people in the 

private insurance market. 

The vast majority of employers who applied for a waiver reacted 

to the application process positively. We have been open to feedback from applicants, and based on their input we improved the 

application process so that it is timely and responsive to their 

needs. We view our work as a partnership between the Federal 

Government, States, employers, and consumers who are constantly 

striving to meet—and we are constantly striving to meet—our 

stakeholders’ needs. 

As we work toward 2014, we are implementing the ACA carefully 

and responsibly so that coverage is maintained and the market is 

not disrupted. 

Thank you for the privilege of appearing before you, and I would 

be happy to answer any questions. 

[The prepared statement of Mr. Larsen follows:] 

17 


65977.253
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65977.254
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65977.255
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65977.256
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65977.257
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65977.258
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65977.261
26 

Mr. STEARNS. Thank you, Mr. Larsen. Mr. Angoff. 

TESTIMONY OF JAY ANGOFF 

Mr. ANGOFF. Mr. Chairman, Madam Ranking Member—— 

Mr. STEARNS. I think you have to pull it a little closer, and you 

got the mike on. Right? 

Mr. ANGOFF. Yes, sir. 

Mr. STEARNS. OK. 

Mr. ANGOFF. Yes, sir. 

Mr. STEARNS. OK. There you go. 

Mr. ANGOFF. Mr. Chairman, Madam Ranking Member, members 

of the committee, I appreciate the opportunity to testify here today 

to discuss the Department of Health and Human Services work to 

implement the Affordable Care Act. 

I currently serve as Senior Advisor to HHS Secretary Kathleen 

Sebelius. I also served as the Director of the Office of Consumer Information and Insurance Oversight, known as OCIIO, during its 9 

months as an independent division of HHS until its recent merger 

into the Centers for Medicare & Medicaid Services, or CMS. 

OCIIO’s accomplishments during that period include the following: during its first 3 months, the establishment of two major 

programs, the Pre-Existing Condition Insurance Plan and the Early 

Retiree Reinsurance Program, and the development and implementation of our new Web site, healthcare.gov. During its first 6 

months, the promulgation of regulations implementing the insurance market reforms of the Affordable Care Act. Among other 

things, those rules now enable young adults to stay on their parents’ policies until age 26; they prohibit insurers from discriminating against those under 19 with pre-existing conditions or from 

canceling coverage; and, they eliminate lifetime limits on coverage. 

During its first 7 months, we implemented three major grant 

programs to States: rate review grants, which are enabling States 

to establish or strengthen their capacity to review and, where appropriate, to disapprove proposed health insurance rate increases; 

exchange planning grants, which are enabling States to begin the 

work necessary for establishing their exchanges; and, consumer assistance grants, which are enabling States to develop or strengthen 

existing programs enabling consumers to obtain insurance and to 

more effectively deal with their insurance companies. 

By the end of 2010, the promulgation of the medical loss ratio 

rule and the rate review rule. Under our medical loss ratio rule, 

insurers in the individual and small group markets must spend at 

least 80 cents of the premium dollar on health care costs and quality improvement activities and no more than 20 cents of the premium dollar on administrative expenses. Insurers that don’t meet 

this standard must either reduce their premiums or issue rebates 

to their policyholders. 

Under the rate review rule, insurers must publicly justify proposed increases exceeding 10 percent, which are then reviewed for 

reasonableness by the State, or if the State does not review rates, 

by HHS. 

These reforms, Mr. Chairman, are already having a positive effect in the marketplace. For example, the Trade Press is now reporting that, as a result of the medical loss ratio rule, insurance 

27 

companies are streamlining their expense structures, moderating 

their increases, and improving their benefit packages. And more 

than 1.2 million adults can now remain on their parents’ health insurance plans because of our dependent coverage until 26 rule, part 

of what we call the Patients’ Bill of Rights. 

Most importantly, individuals are being helped. People like 

Kayla Holmstrom, who was in a motorcycle accident when she was 

9 and has a chronic bone infection but who is studying to become 

a nurse at South Dakota State University and can now stay on her 

parents’ policy until she is 26. And people like James Howard from 

Katy, Texas, who has brain cancer and was canceled by his insurance company but was able to get coverage through the PCIP Program that may well have saved his life. 

While the American health system has always set examples of 

shining successes and good care if you can get it, the system has 

failed other citizens for too long. People with pre-existing conditions have been locked out of coverage by insurance companies. 

After long careers we have told Americans to keep working until 

they reach the age of 65 because without a job as a practical matter they can’t get health insurance because insurance companies 

surcharge them both based on their age and based on health status. We have allowed insurance companies to select out risks and 

to segment the market, to cherrypick the healthy and to exclude 

the less healthy. 

The Affordable Care Act, Mr. Chairman, is changing this. It is 

building a more equitable health care system which empowers consumers, establishes new consumer protections under the law, and 

gives consumers new information so they can make the best choices 

for themselves and their families. It is putting consumers back in 

control of their health care coverage by giving them an unprecedented amount of clear information on the health care market, protections that bolster the rights of consumers in dealing with insurance companies, and an innovative new marketplace. 

Most importantly, beginning in 2014, the Affordable Care Act 

will allow individuals, families, and small business owners to pool 

their purchasing power through new State-based exchanges in 

which insurers will compete based on price and quality, and people 

will be able to make apples-to-apples comparisons. 

In conclusion, Mr. Chairman, I have every confidence that the 

new Center for Consumer Information and Insurance Oversight 

within CMS will continue the vital work of the Office of Consumer 

Information and Insurance Oversight, and I look forward to the results it will produce. Thank you for the opportunity to appear before you today, and I would be happy to answer any questions you 

or the members of the committee may have. 

Mr. STEARNS. I thank you, and I thank both of you for your opening statements. I will open with my series of questions. 

The ranking member indicated the efficiency of the Obamacare 

and how the people who got the waivers sent thank you letters 

back. I would submit that is like saying to a person who won the 

lottery, are you happy with the efficiency of the lottery that you 

won? They would explicitly say, yes, and be glad to send a lot of 

thank you letters back. 

28 

But having said that, Mr. Larsen, I just looked through your resume, and I noticed that Governor O’Malley appointed you as a 

member of the Maryland Health Service Cost Review Commission 

that actually sets the rates in the State. Is that true? 

Mr. LARSEN. That is correct. 

Mr. STEARNS. Are you still on that board? 

Mr. LARSEN. No, I am not. 

Mr. STEARNS. When did you leave that board? 

Mr. LARSEN. When I started with the Federal Government. 

Mr. STEARNS. OK. So I was a little concerned. I wasn’t sure—— 

Mr. LARSEN. No, I am not. 

Mr. STEARNS. OK. Let me move to this, Mr. Larsen, to this area 

of waivers. When we ask questions, we each have 5 minutes, so if 

you could just answer yes and no, and if we reach an impasse here, 

I will certainly give you a little time, but I am hopeful that you can 

answer most of the questions yes or no. 

I have been informed that you folks are considering or have 

given a waiver to the entire State of Florida. Is this true? 

Mr. LARSEN. We established a process that permits States—— 

Mr. STEARNS. No, not—— 

Mr. LARSEN [continuing]. To apply. 

Mr. STEARNS. Has the State of Florida received a waiver? Yes or 

no? 

Mr. LARSEN. Yes. 

Mr. STEARNS. OK. 

Mr. LARSEN. Well, may I clarify? 

Mr. STEARNS. Oh, sure. 

Mr. LARSEN. The process that we set up for the States essentially 

allows the States to apply on behalf of—— 

Mr. STEARNS. I understand. 

Mr. LARSEN [continuing]. The issuer. 

Mr. STEARNS. Just in curiosity, did New York State get a waiver, 

the entire State? 

Mr. LARSEN. Not to my knowledge. 

Mr. STEARNS. So only Florida. Can you list to me all the States 

that got a complete waiver? 

Mr. LARSEN. Yes. I can confirm, I think it is Ohio, Tennessee, 

Florida, and there may be one more. 

Mr. STEARNS. And New York City being considered? New York? 

Mr. LARSEN. I don’t believe New York applied, but I can double 

check. 

Mr. STEARNS. Can I ask you this question? Has New York applied? 

Mr. LARSEN. The State of New York? 

Mr. STEARNS. State of New York. Our understanding they have 

applied. 

Mr. LARSEN. Oh, they have applied. 

Mr. STEARNS. OK. New York—— 

Mr. LARSEN. But we haven’t made a decision. 

Mr. STEARNS. Oh. I understand, but New York has applied. OK. 

So the question is, obviously, why would Florida need a waiver, 

why would New York need a waiver, and all these other States you 

are giving complete current blocks for these States? You know, I 

think for many of us under the 10th Amendment we believe the 

29 

States should be able to come up with their own health care and 

perhaps handle their health insurance market better than the government. 

Simply tell me why would the State of Florida, perhaps New 

York, and why are these people, why do you think Florida needs 

a waiver, the entire State? 

Mr. LARSEN. Sure. Sure. So the waiver program is set up to ensure that that small percentage of employees under these small 

benefit policies can continue coverage. So in a small number of 

States there are State programs that authorize or require these 

limited-benefit policies. And so we made the determination to allow 

the States to apply on behalf of the issuers in their State. 

Mr. STEARNS. Now, the big question is, OK, all these States, you 

are 1 year into this, and you are recognizing large States and small 

States, you are giving waivers, what happens in 2014? In fact, 

these waivers are only for 1 year, aren’t they? 

Mr. LARSEN. That is correct. 

Mr. STEARNS. OK. So then all these States will have to come 

back in the year 2013? 

Mr. LARSEN. We made the decision for a 1-year waiver in order 

to gather better information about these types of policies—— 

Mr. STEARNS. If they needed a waiver—— 

Mr. LARSEN [continuing]. And we will determine—— 

Mr. STEARNS [continuing]. In 2011, won’t they need a waiver in 

2012, and ’13, so you will go back and give a waiver—— 

Mr. LARSEN. Well—— 

Mr. STEARNS [continuing]. Presumably again? 

Mr. LARSEN [continuing]. I was trying to answer. We haven’t 

made a determination about—— 

Mr. STEARNS. OK. 

Mr. LARSEN [continuing]. What happens. These policies and 

these waivers represent a glide path, if you will, a transition to 

2014, so we set them up to do the first year, to gather data, and 

then determine what the next steps would be between now and 

2014. 

Mr. STEARNS. Would it be fair to say then the year 2014, none 

of these people will get waivers, or will you consider giving waivers 

ever after the exchange is in place? 

Mr. LARSEN. In 2014, consumers will have access to full coverage, 

not the types of limited-benefit policies that they have today, so in 

2014, there won’t be limited-benefit policies to be waived from. 

Consumers will have access to the full range of benefits. 

Mr. STEARNS. I guess the basic question was McDonald’s is a 

large corporation that got a waiver. Is that true? 

Mr. LARSEN. The carrier that provides coverage to McDonald’s, 

yes. 

Mr. STEARNS. Got a waiver. And didn’t Waffle House get a waiver? I don’t know. I think the staff is saying yes. 

Mr. LARSEN. OK. 

Mr. STEARNS. So I assume—I would think you should know 

these. 

Mr. LARSEN. Well, I haven’t memorized the list of—— 

Mr. STEARNS. Well, some of the big ones like McDonald’s and so 

forth I would think you would know. 

30 

Mr. LARSEN. Well, I do know about McDonald’s. 

Mr. STEARNS. Well, let me ask you. Did Denny’s get one? 

Mr. LARSEN. I would have to look at the list. 

Mr. STEARNS. OK. How many private corporations, do you know, 

just off hand? A dozen or 100 or—— 

Mr. LARSEN. Well—— 

Mr. STEARNS [continuing]. Because you got 915 that got waivers, 

and you said you denied 61, so out of that 915 you gave me a percent. How—so I guess some of the large corporations got these 

waivers. 

Mr. LARSEN. When we think about the waivers, we think about 

the type of employers and issuers that have applied. So self-insured 

employers, for example—— 

Mr. STEARNS. OK. 

Mr. LARSEN [continuing]. Represent 49 percent of the applicants, 

we have—— 

Mr. STEARNS. I can’t miss this question. Where in the Health 

Care Bill does the word waiver—can you give me the specific line 

where it says waivers will be granted to health care providers in 

the Health Care Bill? Where do you get your—— 

Mr. LARSEN. Sure. The annual limits provision of the Affordable 

Care Act specifically directs the Secretary to implement this provision in a way that ensures—— 

Mr. STEARNS. But the word waiver is not in there. 

Mr. LARSEN. I don’t know whether the word—— 

Mr. STEARNS. We couldn’t find it anywhere. So you are saying 

your interpretation is implying that your definition of waiver is 

through that interpretation of the language? 

Mr. LARSEN. To comply with the requirements of the ACA. 

Mr. STEARNS. OK. My time is expired. 

The ranking member, Ms. DeGette. 

Ms. DEGETTE. Thank you very much. Mr. Larsen, when you say 

that a waiver was given to Florida, that doesn’t mean every insured person in Florida was given a waiver. Correct? 

Mr. LARSEN. That is correct. 

Ms. DEGETTE. I mean, basically, what it is is waivers were given 

to some States that had State laws that would violate the new federal law, and they were given specifically for these individual market plans within those States. Correct? 

Mr. LARSEN. Sure. States that have—yes. 

Ms. DEGETTE. So how many States did that involve? 

Mr. LARSEN. I think we have approved four States to date. 

Ms. DEGETTE. Four States. And those States were approved 

based on their State laws that might have affected those individual 

plan markets. Correct? 

Mr. LARSEN. Even the applicants in the States had to still satisfy 

the regulatory standard for getting a waiver. 

Ms. DEGETTE. So there was no political—someone from the 

White House didn’t call you folks up and say, approve these States 

because it is going to be important in the election next year. 

Mr. LARSEN. No, and we applied the standards consistently 

across all applicants—— 

Ms. DEGETTE. Thank you. 

Mr. LARSEN [continuing]. Whether it was State applicant or—— 

31 

Ms. DEGETTE. Now, Mr. Larsen, some have alleged that the process through which waivers to annual limits are granted lacks 

transparency, so I want you to walk us through the process by 

which your agency makes waiver decisions. Can you briefly describe the factors that you take into account when evaluating waiver requests? 

Mr. LARSEN. Yes, and the standards were set out in the regulation that we issued subsequent to the passage of the ACA. The 

standard—— 

Ms. DEGETTE. Can you briefly describe those standards? 

Mr. LARSEN. Sure. So the regulatory standard requires that an 

applicant show that there either be a significant increase in premiums or significant decrease in access to care. So that is the regulatory standard. We then issued subsequent guidance, I believe in 

November, that articulated factors that we use in evaluating those 

two standards, which include whether the compliance with the restrictions on the annual limits would result in a decrease in access 

to benefits, looking at the policies’ current annual limits. If the annual limits are particularly low, there will be more of an impact, 

looking at the change in percent of—the change in premiums in 

terms of percentage, and then the change in premiums in terms of 

absolute dollar values, and then the number and types of benefits 

that would be impacted by application of the law. 

Ms. DEGETTE. And is my understanding accurate that CCIIO has 

reached out and continues to reach out to stakeholders to make 

sure that you are addressing any concerns that they may have regarding the waiver process? 

Mr. LARSEN. We do. 

Ms. DEGETTE. And in which way? 

Mr. LARSEN. Well, we have constant interaction with the applicants as they file, and if they have issues, hopefully they are 

brought to my attention, and we seek to resolve them, and I think 

as was mentioned earlier we have what I believe is very positive 

feedback that we have received from applicants. 

Ms. DEGETTE. Now, as you describe, you put out an interim final 

rule and guidance on the waiver process, and about 90 percent of 

the applicants for waivers have been approved, so that would seem 

to me that the process is working because people understand what 

the criteria are, and they understand how to go through the process. 

But there has been one concern that has been raised, and not by 

this committee but by Chairman Issa’s committee, the Oversight 

Committee, they said that you had not adequately defined some of 

the criteria you use in making decisions. For example, he said you 

hadn’t published a clear bright line numerical definition of a large 

premium increase. 

So I guess my question is is it accurate that you have not published a strict numerical definition of what constitutes a large or 

significant premium price increase? 

Mr. LARSEN. That is right. We do not have—— 

Ms. DEGETTE. And can you tell me why not? 

Mr. LARSEN. Sure. We took the view that applying an absolute 

number would not adequately allow us to fairly process the applications as they came in because the applications in terms of the numVerDate Nov 24 2008 14:18 May 18, 2011 Jkt 037690 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-7 021611\112-7 CHRIS
32 

ber of employees affected, in terms of their baseline premiums, 

they all—they vary significantly. So, for example, you could have 

a policy that had a very high premium but a low percent impact 

but actually still has a significant impact on people that pay the 

premiums. 

So picking an absolute number we didn’t think would be the best 

approach. 

Ms. DEGETTE. But just because you don’t have an absolute number doesn’t mean you don’t have criteria. Correct? 

Mr. LARSEN. No. We do have criteria. 

Ms. DEGETTE. Thank you very much. I yield back. 

Mr. STEARNS. The gentlelady yields back. Our next—Dr. Burgess. 

Dr. BURGESS. Thank you, Mr. Chairman, and Mr. Angoff, it has 

already been pointed out we have 5-minute increments in which 

our lives are lived, so I am going to ask you a series of questions, 

and I am going to ask us to go fairly quickly, so if we can, yes or 

no answers. 

When you came and visited me in my office, I believe it was November 30, I had some questions then you were kind enough to answer. We had the luxury of additional time, but today we need to 

go fairly quickly, so I am going to list a number of functions that 

it is my understanding were under your—when you were the head 

of OCIIO, the previous agency, that they were under your purview. 

So please let me know as I read through this list, please acknowledge that they were under your jurisdiction, or if they were not, let 

me know that as well. 

So children with pre-existing conditions? 

Mr. ANGOFF. Yes. 

Dr. BURGESS. Healthcare.gov? 

Mr. ANGOFF. Yes. 

Dr. BURGESS. Rescissions. 

Mr. ANGOFF. Yes. 

Dr. BURGESS. No rescissions. 

Mr. ANGOFF. Right. The rule prohibiting rescissions. 

Dr. BURGESS. The co-op program? 

Mr. ANGOFF. Yes. 

Dr. BURGESS. Federal high risk pool? 

Mr. ANGOFF. Yes, which is the same as the pre-existing condition 

insurance plan. 

Dr. BURGESS. Waivers for insurance plans? 

Mr. ANGOFF. Yes. 

Dr. BURGESS. Grandfathered regulations? 

Mr. ANGOFF. Yes. 

Dr. BURGESS. Early retiree programs? 

Mr. ANGOFF. Yes. 

Dr. BURGESS. Annual limits? 

Mr. ANGOFF . Yes. 

Dr. BURGESS. Waivers for businesses? 

Mr. ANGOFF. Yes. 

Dr. BURGESS. State exchanges? 

Mr. ANGOFF. Yes. 

Dr. BURGESS. Coverage for children under parents’ plans? 

Mr. ANGOFF. Yes. 

Dr. BURGESS. Age 26. 

33 

Mr. ANGOFF. Right. 

Dr. BURGESS. And the medical loss ratio? 

Mr. ANGOFF. Yes, sir. 

Dr. BURGESS. So all these things are functions for which you 

were responsible for overseeing and implementing? 

Mr. ANGOFF. Correct. 

Dr. BURGESS. Can you help us—I have got a copy of the Patient 

Protection Affordable Care Act here. Can you direct us to the section of PPACA that authorizes OCIIO to speak in acronyms for just 

a moment? 

Mr. ANGOFF. The Secretary has discretion to manage and operate 

her office, but to answer your question, Congressman, there is no 

particular specific authorization in the bill that says there shall be 

created an Office of Consumer Information and Insurance Oversight. That is part of the Secretary’s discretion. 

Dr. BURGESS. So there is no authorization statute in the law that 

was signed by the President on March 23 of last year? 

Mr. ANGOFF. Well, the functions are authorized. The specific office, there is no section of the bill which—— 

Dr. BURGESS. So what about CCIIO, the follow-on organization? 

Is there a section in here that I have missed that authorizes the 

follow-on organization? CCIIO, whatever exists today? 

Mr. ANGOFF. There is no section specifying the name OCIIO or 

CCIIO. 

Dr. BURGESS. Neither branch of the federal agency was specifically authorized under the legislation. 

Mr. ANGOFF. But the functions that those agencies carry out are 

authorized in the bill. 

Dr. BURGESS. So when in the timeline were you hired by the Administration for the purposes of creating and running OCIIO? 

Mr. ANGOFF. I was hired, I believe my first day on the job was 

February 16, and—— 

Dr. BURGESS. February 16 of 2010? 

Mr. ANGOFF. February 16 of 2010. The—— 

Dr. BURGESS. Happy anniversary then. 

Mr. ANGOFF. Oh, thank you very much. 

Dr. BURGESS. And I have the Federal Register from April 19, 

2010—— 

Mr. ANGOFF. Right. 

Dr. BURGESS [continuing]. Which talks about the Secretary organizing your agency. 

Mr. ANGOFF. Yes. Before you wished me happy anniversary I was 

about to say that the office was authorized on April 19. 

Dr. BURGESS. So March 23, signed into law, April 19, Federal 

Register, within a month of passage the Administration realized 

that they needed and the legislation lacked and they were able to 

divert funds to hire you, create OCIIO, and do this whole creation 

basically out of thin air, out of whole cloth because it wasn’t authorized in statute. 

Mr. ANGOFF. Well, obviously I wouldn’t agree with that characterization. 

Dr. BURGESS. Well, OK. Well, what about—this is pretty simple 

then. Where did the money come from? Where was the funding for 

OCIIO? 

34 

Mr. ANGOFF. The money came from the $1 billion that was appropriated as part of the ACA and then in addition, there are certain statutes, certain provisions of the Affordable Care Act which 

carried with them funding to carry out those particular provisions. 

Dr. BURGESS. So would a correct characterization be you were 

able to skim money off say some areas like the money for the high 

risk pools to fund your organization? 

Mr. ANGOFF. No. That is not a characterization, and that is not 

an accurate characterization because—for this reason. 

Dr. BURGESS. Perhaps you would be able to provide to the Committee a detailed budget of where the money came from, the million dollar initial authorization, but there were other agencies making draws on that as well. Presumably you had at the end of the 

day your agency merged into another one, how many employees 

were working for you? 

Mr. ANGOFF. Two hundred and fifty-two. 

Dr. BURGESS. All right. That is not inexpensive to hire 252 people in Washington or Maryland. 

Mr. ANGOFF. No. If I could just go back, though, Congressman, 

just to one point because I think it is very important to realize that 

the Act has certain sections which carry with it specific appropriations for those sections. 

Dr. BURGESS. Let me just ask you very briefly. Do you have and 

can you produce for the Committee a delegation of authority from 

the Secretary of HHS that we can use to better understand what 

your services were at OCIIO? 

Mr. ANGOFF. Yes. There was such a delegation, and I am happy 

to produce it. 

Dr. BURGESS. I yield back. Thank you, Mr. Chairman. 

Mr. STEARNS. Thank the gentleman, and the gentleman from 

Michigan, Mr. Dingell, is recognized for 5 minutes. 

Mr. DINGELL. Please respond yes or no to this—these questions 

if you can, and if the answer is no, would you also please submit 

a detailed explanation for the record? 

One, the underlying goal of the Affordable Care Act was to provide affordable quality health care for all. Do you believe the limited benefits plans provide that quality and that they provide comprehensive care to consumers? Yes or no? 

Mr. ANGOFF. No. 

Mr. DINGELL. OK. Next, we know that millions of Americans do 

rely on limited-benefit plans. Do you believe consumers have been 

adequately informed about the benefit limits under these plans? 

Yes or no? 

Mr. ANGOFF. No. 

Mr. DINGELL. The waivers are for how long? Only for 1 year. 

Right? 

Mr. ANGOFF. Yes, sir. 

Mr. DINGELL. And they will be reviewed at the end of that year? 

Mr. ANGOFF. Yes, sir. 

Mr. DINGELL. So you will have the chance to reissue the waiver 

or to deny the waiver at that particular time. 

Mr. ANGOFF. That is correct. 

Mr. DINGELL. This is a transitional step, is it not? 

Mr. ANGOFF. Yes, it is. 

35 

Mr. DINGELL. And the purpose is to see to it that you don’t take 

away from the recipients of the benefits under these plans, the benefits that they are receiving while you set up the larger plan as required by the statute. Is that right? 

Mr. ANGOFF. That is exactly right. 

Mr. DINGELL. Now, under ACA the Secretary has authority to determine what is restricted annual limits, and the responsibility to 

also protect consumer access to essential health benefits. We know 

that we allow an appropriate transition time. Some States, employers, and insurers would be unable to comply with the no annual 

limits provision and without an adverse impact on coverage or premiums. Is that correct? 

Mr. ANGOFF. Yes, sir. 

Mr. DINGELL. Do you believe that waivers are necessary to provide an uninterrupted, affordable transition coverage to individuals? 

Mr. ANGOFF. I do. 

Mr. DINGELL. And you will be reviewing these matters as we 

move towards 2014, and the full statute goes into effect. 

Mr. ANGOFF. That is correct. 

Mr. DINGELL. Is that right? Do you believe that the necessary 

guidance and assistance from the CCIIO has been readily available 

and accessible to assist potential applicants in completing the waiver application process? Yes or no? 

Mr. ANGOFF. Yes. 

Mr. DINGELL. Do you believe that CCIIO has dedicated an adequate amount of staff time to be responsive to potential applicants 

regarding the waiver application process? Yes or no? 

Mr. ANGOFF. I do. 

Mr. DINGELL. And you have put considerable effort into seeing to 

it that those resources are available for that purpose. 

Mr. ANGOFF. Yes, we have. 

Mr. DINGELL. Do you believe that the waiver process has provided an ample and an adequate transition time for employers and 

employees to comply with the Affordable Care Act? 

Mr. ANGOFF. Yes, sir. 

Mr. DINGELL. And that, of course, is, again, one of the purposes 

of the waiver provisions. 

Mr. ANGOFF. Yes, it is. 

Mr. DINGELL. Waivers are being granted. Is that right? 

Mr. ANGOFF. Yes, it is. 

Mr. DINGELL. Now, do you believe that the enrollees will receive 

greater information about the limited benefits in their health plan 

under the waiver process? 

Mr. ANGOFF. I do. 

Mr. DINGELL. Now, let us try and summarize. The—we are moving towards the establishment of the national plan which takes 

place in about 2014. This is going to be a very complicated exercise 

and a complicated plan. You will be reviewing these waivers periodically to see to it that they further your purposes of and the purposes of the statute in getting us where we can have a good workable national plan which provides to an orderly transition to that. 

Is that correct? 

Mr. ANGOFF. That is correct. 

36 

Mr. DINGELL. Now, if you did not grant these waivers, what 

would be the practical result? As I read it, you would be kicking 

all these people off their plans, they would receive no benefits, and 

so we would have a very large problem of a lot of people not receiving any coverage at all. Is that correct? 

Mr. ANGOFF. Yes, it is. 

Mr. DINGELL. The plans are—a lot of these plans are subject to 

criticism on the adequacy of the benefits provided, but nonetheless, 

that is better than having no plans to cover these people, which 

could happen if you did not give the waiver. Is that correct? 

Mr. ANGOFF. That is true. 

Mr. DINGELL. Mr. Chairman, I note that I have 18 seconds to 

yield back. Thank you. 

Mr. STEARNS. I thank the gentleman, and next we will go to Mr. 

Murphy. 

Mr. MURPHY. Thank you, Mr. Chairman. The Institute of Medicine has been asked by HHS to make recommendations on the criteria and methods for determining and updating the essential 

health benefits package called for by the Affordable Care Act, and 

you know, Congress did not call for definition of medical necessity 

in the bill. While the House bill included a definition, it was not 

included in the final bill as amended. 

But as I understand it Health and Human Services has asked 

the Institute of Medicine to review definitions and applications of 

medical necessity, which we didn’t call for in the Affordable Care 

Act, and is outside the scope of defining essential benefits. 

Can you tell me what authority does HHS believe it has to include this in the definition of essential health benefits? 

Mr. LARSEN. Well, I can try and answer that. I apologize. I know 

that the Institute of Medicine has been tasked with helping HHS 

define what essential benefits are, and that will also be supplemented with a study by the Department of Labor. I have to confess 

I am not familiar with the medical necessity component of the task 

that has been asked, so I can follow up. 

Mr. MURPHY. Can you do that? I would really appreciate if you 

would follow up. That would be great. Thank you. 

Mr. LARSEN. I will do that. 

Mr. MURPHY. Now, I want to ask a little bit more about these 

waivers. One of the waivers from the State of Ohio, my neighbor 

in Pennsylvania, and it is interesting a statement from Mary Jo 

Hudson, who is the Director of the Ohio Department of Insurance, 

was this. She said, ‘‘Not allowing a blanket waiver for all companies for basic and standard open enrollment in group conversion 

options would lead to an unlevel playing field. Some companies will 

seek waivers while others won’t.’’ 

I think that is a good point, but how are you sure you haven’t 

created some sort of an unlevel playing field, make sure everyone 

affected by the bill, the annual limits, know that they can apply for 

waiver? 

Mr. LARSEN. Yes, thank you, and I don’t think we have created 

an unlevel playing field. There are a small number of States that, 

through State policy, have encouraged or required insurance companies to offer these as we call them, mini-med policies, in order 

37 

to make sure that there is a policy available for some people who 

otherwise couldn’t afford coverage. 

And in establishing the waiver process and particularly the State 

process, we did want to make sure that people who have that coverage can, today, continue that coverage. So we set up a process 

that allows for the States, when there is a State policy or law or 

program that requires carriers or establishes a program that offers 

these types of mini-med policies to apply for a waiver. 

Mr. MURPHY. It still is a situation in question, is everybody wellinformed? Are you comfortable with how people are informed that 

they can apply for waivers, and they understand the terms and 

conditions of—once they can obtain a waiver? 

Mr. LARSEN. We are. Again, I think we have been very transparent in publicizing this. The States are aware of it. We have 

worked through a number of different outside entities and trade 

groups and the NEIC to make sure that the word got out that 

there was an option to apply for these types of waivers. 

Mr. MURPHY. How about a medical loss ratio? A number of 

States have applied for things, Georgia, Iowa, Maine, South Carolina, Texas, et cetera, all requesting waivers for medical loss ratio. 

Have any of the States contacted you about waivers for the MLR? 

Mr. LARSEN. I would answer that in two ways. Before the medical loss ratio regulation was issued in December, we received a 

number of letters from States because the statute contemplates a 

State-based waiver process, but we hadn’t set up the process yet. 

So we did receive letters from States before the regulations were 

issued. 

Since the regulations were issued in December that laid out the 

process for applying, I believe we have received three States—— 

Mr. MURPHY. Would you let us know all the States that have 

that under—and what standards would a State obtain an exemption? 

Mr. LARSEN. Sure. Well, the standards are set out in the regulation. 

Mr. MURPHY. Just make sure we know that. 

Mr. LARSEN. Yes. 

Mr. MURPHY. The other thing I want to know is with the waivers 

that are being granted on multiple levels, has anyone done an economic or financial analysis of what this means in terms of the overall financial stability or instability, whatever, of the entire health 

care package? 

Would either of you know what that is? 

Mr. LARSEN. I am not familiar with a study that looks at the impact of waivers. 

Mr. MURPHY. The issue being that if someone is required to participate, then they are waived from that, I don’t know what this actually means in terms of revenues spent, revenues locked in. We 

are trying to get a handle on what all this means and the whole 

financial analysis of this bill and not clear if anybody is doing that 

analysis. 

Mr. LARSEN. Well, in the transition between now and 2014, I 

think these limited waivers are beneficial to all the stakeholders, 

to both—either the companies or the issuers or the States or the 

38 

beneficiaries so that they can continue the coverage between now 

and 2014. 

Mr. MURPHY. Thank you very much. 

Mr. STEARNS. The gentleman yields back the balance of his time. 

Mr. Green is recognized for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. Annual limits or coverages we understand can be a pretty rotten deal if you are really 

ill for consumers. You pay premiums for many years and then all 

of a sudden you find out that your wife has cancer or maybe your 

child that was just born has some terrible illness that you have to 

have a lot of health care for, and your insurance company ends up 

paying a lot and then they end up hitting up against that annual 

limit and sometimes even a lifetime limit. 

Unfortunately until health care law was implemented, will be 

implemented in 2014, there are some people who have a choice between a plan with low annual limits on coverage or no coverage at 

all, and Congress intended to make sure that people enrolled in 

these plans wouldn’t see their premiums rise dramatically or see 

their options for coverage disappear while employers adjust to new 

consumer protection rules and the full range of health care reforms. 

Mr. Larsen, am I correct that the waiver process that we are 

talking about today was envisioned by Congress and put into place 

to help consumers in these low-cost and low-benefit plans? 

Mr. LARSEN. That is correct. 

Mr. GREEN. It is my understanding that these waivers are temporary and that they only last for a year, and they won’t be available in 2014, or after. Is that correct? 

Mr. LARSEN. That is correct. 

Mr. GREEN. Mr. Larsen, what are some of the benefits that will 

be available to low-wage workers once the annual limit ban becomes firm in 2014? 

Mr. LARSEN. Well, the entire landscape changes to the benefit of 

the consumer. They will have access to an insurance marketplace; 

there will be increased competition, benefits will be fuller; there 

will be premium subsidies available for individuals who can’t afford 

to purchase insurance; but, the insurance that they purchase will 

now have full coverage and not the restricted limits that, unfortunately, some people have today. 

Mr. GREEN. OK, and the waiver process I know benefits businesses, too. Health and Human Services implementing the ban on 

annual limits incrementally, starting with the floor of $750,000 in 

coverage for central care annually and raising that floor gradually 

until annual limits are eventually prohibited. Business and health 

plans would see substantially higher exposure to claims under even 

this incremental approach can apply for short-term waivers. 

What percentage of the businesses that have applied for these 

short-term waivers received them? 

Mr. LARSEN. Well, we approved the vast majority of the applicants that came in. Some are Taft-Hartley Plan, some are self-insured businesses, some are issuers, but overall I think the approval 

rate is about 95 percent or so. 

39 

Mr. GREEN. That is what our staff has come up with, about 90 

percent and these are requests from businesses who are asking for 

that short-term waiver so they can grow into the health care. 

Mr. LARSEN. That is right. 

Mr. GREEN. It seems to me the waiver process implemented is 

just the sort of thoughtful approach that we want in a health insurance reform plan. The President advocated the ban on annual 

limits is a critical consumer protection, and the waiver process allows the Administration to implement that protection with due regard to individual circumstances and individual particular consumers and businesses. 

The prohibiting annual limits is important reform that responds 

to one of the worst features of our insurance market today, and, 

again, I served 20 years in the legislature, and I understand what 

happens in legislatures where you have very low-limit policies because you hope sometimes somebody has one, just has a policy. 

Annual limits can leave consumers, particularly those with expensive and chronic conditions and those experiencing catastrophic 

medical limits, with enormous medical debt and without an ability 

to access the health care. Congress included a ban on annual limits 

in the Reform Bill, but it also gave HHS the authority to waive it. 

It is my understanding this waiver process was necessary to ensure the small number of people in certain low-cost, low-benefit 

plans, often called mini-meds, which still have access to at least 

some coverage before health care reform is fully implemented. Is 

that your understanding, Mr. Larsen? 

Mr. LARSEN. That is right. 

Mr. GREEN. Since this waiver process does not represent a flaw 

in the health care law but rather a recognition that flexibility and 

accommodation of unique circumstances—you don’t turn around a 

battleship or an aircraft carrier immediately just like you don’t 

turn around our health care plan. 

Under circumstances would be required we build towards full 

range of consumer protections, and benefits will be available to all 

Americans in 2014. Is that correct? 

Mr. LARSEN. That is correct. 

Mr. GREEN. In fact, the waiver process responds to an uncommon, relatively uncommon set of circumstances. What percentage 

of the people in private insurance plans, Mr. Larsen, are covered 

by plans that have received a waiver? 

Mr. LARSEN. Well, again, the number is about 21⁄2, so less than 

2 percent of people that have employer-based coverage are in plans 

that have received a waiver. 

Mr. GREEN. So we are addressing this problem, but less than 2 

percent—— 

Mr. LARSEN. That is right. 

Mr. GREEN [continuing]. Have requested or received a waiver. 

Compared to the number of people receiving protection against annual limits under the Affordable Care Act, I would call that number a very small amount. I wish we didn’t have to issue any waivers from this important protection, but just over 1 or 2 percent 

seems fairly minor. 

In addition, the annual limit restrictions are but one important 

part of the series of protections that have been implemented since 

40 

enactment. Young adults can now stay on their parents’ policies 

until 26, lifetime limits have been eliminated, plans must cover 

preventative care for free. 

Mr. Larsen, are any of these protections or any of those protections being waived? 

Mr. LARSEN. No. No, sir. 

Mr. GREEN. OK. So the core protections of the law continue to 

be implemented smoothly with benefits for families, employers in 

this area. Is that correct? 

Mr. LARSEN. That is correct. 

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

time. 

Mr. STEARNS. All right. Thank the gentleman. The gentlelady, 

Mrs. Myrick, is recognized for 5 minutes. 

Mrs. MYRICK. Thank you, Mr. Chairman. Thank you both for 

being here. 

The center contains the Office of Insurance Programs, which will 

administer the temporary high-risk pool program called the PreExisting Condition Insurance Plan. The health care law created 

this program with $5 billion in funding. Correct? I guess these 

probably go to Mr. Larsen since you are the head of that right now. 

Correct? 

Mr. LARSEN. I can speak somewhat, and Jay can as well. 

Mrs. MYRICK. OK. Well, whoever wants to answer. Go ahead. 

OK. Is—the $5 billion is correct. Right? 

Mr. ANGOFF. Yes. 

Mrs. MYRICK. And HHS recently announced the enrollment in 

the program. What was the number? 

Mr. ANGOFF. Approximately 12,000. 

Mrs. MYRICK. Twelve thousand, which seems awfully low considering the fact that pre-existing conditions were used routinely as 

one of the reasons that we needed to have the law. So don’t you 

think the health care law, an unprecedented intrusion into the 

health care sector, was probably oversold by continually referencing 

those who had pre-existing conditions? 

Mr. ANGOFF. No, I don’t think so, Congresswoman. And I don’t 

think it is law. The program has only been up for a couple of 

months. It is a transitional mechanism. It is only necessary because, under current law, insurance companies are permitted to exclude people based on health status and to charge more based on 

that. 

Mrs. MYRICK. Well, when the report was issued last April CMS’s 

Chief Actuary said the creation of a national high-risk insurance 

pool will result in roughly 375,000 people getting coverage in 2010, 

and if only 12,000 have enrolled, it seems to me that that is an 

overestimate of about 360,000 people for last year. 

Mr. ANGOFF. No question that prediction has proved to be inaccurate. There were fears that the program would be overrun, and 

that has not occurred. 

Mrs. MYRICK. Well, the Washington Post did a story also at the 

end of 2010, in December, the open question was—this is what 

they said. It is an open question whether the $5 billion allotted by 

Congress to start up the plans will be sufficient. Do you think 

these high-risk pools will need additional funding? 

41 

Mr. ANGOFF. No, I don’t. 

Mrs. MYRICK. The same news article states New Hampshire’s 

plan has only about 80 members, but they already have spent nearly double the $650,000 the State was allotted. Is this true? 

Mr. ANGOFF. No, it is not. They spent more than the amount that 

was allotted for 1 year, but they are well under the amount that 

was allotted for the entire lifetime of the program. 

Mrs. MYRICK. And how many people are they scheduled to enroll 

then in the program? 

Mr. ANGOFF. I am sorry? 

Mrs. MYRICK. How many people are they scheduled to enroll in 

the program based on what you are saying? 

Mr. ANGOFF. I can’t give you a projected number of people, but 

I do know that the projections are that they will not exceed the 

amount that they have been allotted for the entire lifetime of the 

program. 

Mrs. MYRICK. Will States like New Hampshire be provided any 

more money then in case they do? 

Mr. ANGOFF. There is a process pursuant to which money could 

be reallocated but—— 

Mrs. MYRICK. Does that mean reallocated from other States that 

aren’t spending it or—— 

Mr. ANGOFF. Yes, but that is very unlikely because there is no 

State which has spent more than its allocation for the period of—— 

Mrs. MYRICK. At this point. 

Mr. ANGOFF [continuing]. That the program would be in place, 

and as you pointed out, there is a lot of money left to insure a lot 

of people, and we are looking forward to doing that. 

Mrs. MYRICK. The article also states that although they collect 

enrollment data monthly, they have decided—you have decided to 

report it on a quarterly basis. Can you commit to reporting it on 

a monthly basis instead of quarterly since the data is available? 

Mr. LARSEN. I would have to go back and check with our systems 

folks. 

Mrs. MYRICK. Would you do that? 

Mr. LARSEN. Sure. 

Mrs. MYRICK. Because it seems like, if it is overestimated enrollment that is still spending more than it was originally promised, 

if you wait on the quarterly data instead of doing it monthly, it just 

doesn’t—— 

Mr. LARSEN. Sure. 

Mrs. MYRICK [continuing]. Serve the purpose, and it technically 

kind of eliminates political damage. 

Mr. LARSEN. Well, we can do that, and to Mr. Angoff’s point, the 

initial period, the start-up, getting this set up was where the resources were devoted to, to make sure that the program was up 

and running. 

Mrs. MYRICK. OK. 

Mr. LARSEN. So we understand that there are estimates out 

there that are higher than the 12. We know, for example, that after 

we got the program up and running and we started the outreach, 

I think, in the last period, enrollment has increased 50 percent. So 

we are already seeing a very rapid rise in the enrollment of this, 

42 

and we fully expect that to grow as we now, having stood the program, have had the opportunity to get the work—— 

Mrs. MYRICK. Got one more question because I am running out 

of time. HHS recently announced that new resources will be available to increase awareness of the program. Correct? 

Mr. LARSEN. Correct. 

Mrs. MYRICK. And so some of those include working with the 

U.S. Social Security Administration on a comprehensive outreach 

campaign. Any idea on the cost of that? 

Mr. LARSEN. I don’t, sitting here today, but I will get that—— 

Mrs. MYRICK. If you will get it back to me. 

Mr. LARSEN. Absolutely. 

Mrs. MYRICK. I mean, there has already been so much discussion 

about this Health Care Bill, and there has been so much awareness, et cetera, during the long period we debated it that my concern is do we really need to spend more dollars right now on additional outreach? So—— 

Mr. LARSEN. Well, I think we—— 

Mrs. MYRICK [continuing]. Mr. Chairman—go ahead. 

Mr. LARSEN [continuing]. Have learned that it really takes a lot 

of effort. Many of these people have had a tough time; they have 

medical conditions; they don’t have coverage; so, we are going to 

work with hospitals and providers and other sources to make sure 

that they get what they need, and they are aware of this program. 

Mrs. MYRICK. Thanks. I am out of time. 

Mr. STEARNS. Thank the gentlelady. Ms. Schakowsky, recognized 

for 5 minutes. 

Oh, Mr. Waxman. I didn’t see you. 

Mr. WAXMAN. Thank you very much, Mr. Chairman. Some of the 

Republicans on this committee and elsewhere have been relentless 

in their attacks on the Health Care Bill generally and on your Office’s implementation of the bill in particular. One of the main allegations is that CCIIO has acted with bias in granting waivers to 

annual limits on essential benefits coverage. 

Representative Gingrey alleged that the waiver process has been 

‘‘highly political and selective,’’ and that politics and insider status 

rather than objective criteria have been guiding this process. Others have suggested that an increase in waiver grants following the 

November, 2010, election reflects potential reward of political allies. Subcommittee Chairman Stearns said, ‘‘From December, 2010, 

to January, 2011, the number of waivers grew from 222 to over 

700, and yes, a lot of those waivers are going to unions.’’ 

Mr. Larsen, before this hearing HHS turned over to the Committee detailed information on all approvals and denials of requests 

for waivers from the New Annual Limits Provisions of the Affordable Care Act. I would like to get your thoughts on what this information shows about the allegations of bias. 

The information HHS has provided the committee shows that of 

applications by union plans or plans that serve union members 14 

percent were denied waivers compared to denial rate of about 3 

percent for all other applicants, so plans to serve union members 

are almost five times as likely to be denied waivers as other applicants. 

43 

Do you think this information supports allegations that CCIIO is 

showing favoritism toward unions? 

Mr. LARSEN. No. It doesn’t, and to be clear, we didn’t solicit applications from any particular sector. We didn’t favor applicants 

from any particular sector or type of applicant. I know it has been 

described in some cases as a high percentage of union approvals, 

but as I think the data show, and hopefully we have clarified for 

you all, those are generally the Taft-Hartley Plans, which, in fact, 

are employer-sponsored coverage. They are not union plans, and so 

as you point out, there is a very—a small percentage, in fact, of 

unions that have gotten waivers, a much higher percentage of employer-based coverage. 

Mr. WAXMAN. I guess to say that unions are getting special treatment, which they are not, is a way to get people angry because 

they want to stir up hostility to unions, although the unions, unfortunately, are shrinking to less and less an important part of our 

economy. 

Mr. Larsen, the information received from our committee indicates that there was a spike in waiver grants in January of this 

year. Can you explain why there was such an increase? 

Mr. LARSEN. Yes. So we require applicants to submit their requests 30 days in advance of the plan year, the policy year for 

which the coverage takes effect, and because many plan and policy 

years begin on January 1, as you might expect, right around December 1 and the end of November we received an increase in the 

number of waiver applications to coincide with the large number of 

plans. 

So there is kind of a bubble, and things have receded back down 

closer to the levels that we saw right before December. 

Mr. WAXMAN. Well, let me be very specific. I want to ask you this 

question. Is political support for the Obama Administration a factor 

in any way for the CCIIO considering and evaluating applications 

for the waivers to annual limit? 

Mr. LARSEN. No, not in any way. 

Mr. WAXMAN. And can you assure this committee that your office 

has handled the waiver process in an unbiased fashion? 

Mr. LARSEN. We handle the applications in an unbiased fashion. 

Mr. WAXMAN. So when people make these charges, there is no 

basis for these charges. They are all political. It is all propaganda. 

It is just another attack on this Administration, another attack on 

the Health Care Bill. 

I am a strong believer in effective oversight, but this redoric and 

tone surrounding the attacks on HHS implementation of the health 

care law has me very concerned. Opponents have hurled one accusation after another at HHS and at the Health Care Bill, and then 

when the facts emerge, the allegation turns out to be unfounded. 

I hope that we are not going to do this in oversight on all the 

issues that we have before us. I just hear these statements that I 

know are untrue. The Republicans say that they had a bill that 

would have accomplished all the same things that the Democratic 

bill would have accomplished. It would have stopped the discrimination for pre-existing conditions, it would have stopped these discriminations by insurance companies. That isn’t what they proposed at all, and they didn’t propose anything that covered AmeriVerDate Nov 24 2008 14:18 May 18, 2011 Jkt 037690 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-7 021611\112-7 CHRIS
44 

cans. Maybe $3 million, not the $30 million that the bill covered. 

I just get frustrated that we have to run after the falsehoods with 

truth. 

I yield back the balance of my time. 

Mr. STEARNS. Gentlelady from Tennessee is recognized for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman, and we are talking 

so much about the waivers that States are getting, including Tennessee, which came to you and asked for a waiver, and I have got 

their waiver letter with me. This came to you September 17, 2010. 

This was during the administration of Governor Bredesen, who has 

since left office, and we have Governor Haslam. 

But talking about these waivers and our concern, our program in 

Tennessee, CoverTN, which is an innovative program that was put 

in place, and we are concerned about what is going to happen with 

these programs in the future, and I want to read for you page 6 

of this letter that went to you. It says that absent a waiver, absent 

getting a waiver from you, from Obamacare, that the State would 

have to dis-enroll 20,000 Tennesseans, who were not served by the 

commercial market in Tennessee prior to their enrollment in 

CoverTN. It seems likely that the majority of these individuals 

would become uninsured, and finally, it goes on and states that insurance premiums would go up, get this, 86 percent. Eighty-six 

percent. 

So would you agree with me that this would be a significant cost 

increase to individuals and the State? 

Mr. ANGOFF. I would. I would just like to make one thing clear, 

though, that I don’t think has been made clear, which is this. The 

waivers are not granted to States. They are granted for coverage 

that is mandated by States. I am not as familiar with Tennessee 

as I am with New Jersey where I was Deputy Commissioner, and 

in New Jersey, for example, New Jersey mandates that all carriers 

shall have certain coverage. 

Mrs. BLACKBURN. That is right. You all had guaranteed issue in 

New Jersey, but we have a TennCare program that was put up as 

an executive order of the governor and then has been run under 

the purview of CMS. OK, but you all granted Tennessee a waiver 

for this program. Right? 

Mr. ANGOFF. For that specific program. 

Mrs. BLACKBURN. For the CoverTN Program. That is exactly 

right. The program that is working and providing coverage and is 

successful. 

Mr. ANGOFF. Correct. 

Mrs. BLACKBURN. Now, what is Tennessee and what are these 

Tennesseans going to do in 2014? Where are they going to go? 

What is going to happen? Because that program is not going to be 

there unless you give it another waiver. 

Mr. ANGOFF. Well, I’ll just say this. We have been very conscious 

of this—when a State mandates certain coverage, and I will refer 

to New Jersey again because I am most familiar with that, New 

Jersey mandates that carriers sell relatively limited coverage, and 

so when a State mandates certain coverage—— 

Mrs. BLACKBURN. Sir, I am going to interrupt you with that because I am not talking about guaranteed issue. I am talking about 

45 

an innovative program in Tennessee that is working and what is 

going to happen with that program. And, see, I think my State is 

a great example of what is wrong with your approach to this with 

Obamacare, because you are going to take away a program that is 

working and then people are going to be left to go through and try 

to find something through an exchange, and they are going to face 

higher rates, and they are going to face a cramped access to health 

care services. Their insurance cost goes up, and the delivery costs 

goes up. It goes up on two fronts, two separate fronts. 

And I think that the letter—I was looking at page 3 of this where 

it defines the benefits. This is a State solution. CoverTN is a State 

solution to provide affordable basic health insurance for small businesses, the self-employed, and the recently unemployed that covers 

the most frequently-used services. This letter also explains to you 

that because of the way this program was set up, and the letter 

came to you from the Department of Finance and Administration 

from the State of Tennessee on behalf of the CoverTN Program, but 

it states this plan has seen enrollment climb because, number one, 

the plan is affordable, and the medical loss ratio for 2010 was 87 

percent. 

Now, under the current rules this plan would disappear in 2014. 

Is that correct? 

Mr. LARSEN. Congresswoman, if I could respond, I actually think 

we are in agreement on many issues. The State of Tennessee, like 

other States, in response to the very broken marketplace that we 

are all trying to solve. 

Mrs. BLACKBURN. Our marketplace was broken because of the 

implementation of TennCare that ate up 35.3 percent of the budget—— 

Mr. LARSEN. I can’t speak to TennCare. 

Mrs. BLACKBURN [continuing]. And saw hundreds of thousands of 

Tennesseans dis-enrolled from the program. 

Mr. LARSEN. So Tennessee—— 

Mrs. BLACKBURN. You are correct. We were under the 1115 

Waiver Program, and it did nearly bankrupt the State, and I would 

hope, I would like to move onto my last question. 

Mr. LARSEN. If I could, ma’am. 

Mrs. BLACKBURN. No, sir. I have got one last question that I am 

going to ask and because you all avoid it. If history is a guide, what 

in heaven’s name are you going to do with escalating costs? 

TennCare’s cost quadrupled. They quadrupled within about a 5- 

year period of time. 

So if history is a guide and that happens with Obamacare, I 

would love to hear what is your plan for dealing with accelerated 

costs? 

Mr. LARSEN. The Affordable Care Act, in fact, is full of provisions 

and its purpose is to lower the cost curve, and there is a series—— 

Mrs. BLACKBURN. Sir, history tells you that when you go into 

this premise of near-term expenses banking on long-term savings, 

it doesn’t work. What is your plan B? 

Mr. LARSEN. The plan is the Affordable Care Act. That is the 

plan, and it is going to work. 

Mrs. BLACKBURN. Sir, there is no case in history in this country 

where this has worked. 

46 

Mr. LARSEN. This will work. 

Mrs. BLACKBURN. None. It is—— 

Mr. STEARNS. I thank the gentlelady. The time has expired and 

will recognize—— 

Ms. DEGETTE. Mr. Chairman, I would like to ask unanimous consent to let Mr. Larsen answer the very important question that Ms. 

Blackburn asked. 

Mr. STEARNS. Well, I think Mr. Larsen answered it. He said that 

the answer is Obamacare. 

Ms. DEGETTE. No. The previous question that she asked. 

Mr. STEARNS. Mr. Larsen, did you answer her previous question? 

Mr. LARSEN. Well, the point, the only point I was trying to make 

about the State programs and the point that I think we were in 

agreement on, which was the market is broken. People can’t get 

coverage, haven’t been able to get affordable coverage. One response at the State level, these are the States that applied for 

waivers, was to set up programs that have limited benefits, and we 

understand that. We agree that those programs between now and 

2014 should continue so that those people do have access to care. 

Then in 2014, they will have access to much better— 

Mr. STEARNS. I would advise all members we are going to have 

a second round here, so if anybody wants to stay, they can go into 

it. 

So Ms. Schakowsky. 

Ms. SCHAKOWSKY. Well, let me explore that a little further. The 

waiver that is granted to States like Tennessee and Florida is to 

allow the mini-med plans. Talk about those plans for a minute that 

Ms. Blackburn has lauded as some really great coverage. What are 

we really talking about in terms of mini-med plans? Are they not 

limited coverage? 

Mr. LARSEN. They are limited coverage. They are not all the 

same. Some have very low annual limits. Some have restrictions on 

other types of benefits, and that is the dilemma because they are 

not good coverage. They don’t provide comprehensive coverage, but, 

nonetheless, today until the full reforms of the Affordable Care Act 

kick in, that is an option for people. 

Ms. SCHAKOWSKY. Right. 

Mr. LARSEN. And we want people to have that option, even 

though it is not necessarily full coverage. 

Ms. SCHAKOWSKY. So we see that as a bridge—— 

Mr. LARSEN. As a bridge. 

Ms. SCHAKOWSKY [continuing]. As you said to better coverage. 

Would you describe what happens to people who are in the minimed programs now once the full implementation of the Affordable 

Care Act in 2014? 

Mr. LARSEN. Well, they are going to get a much richer, fuller 

benefit package, and they are not going to have to worry about 

whether they spend 4 days in the hospital and run out of their inpatient coverage because there is an annual limit on their policy. 

So consumers are going to be better off. The system is going to 

be better off because we are not going to have the levels of uncompensated care that we have today. So that is the world in 2014. 

Ms. SCHAKOWSKY. I want to go back to the issue of the States 

for just a second, the overall policy, because, again, it was—it 

47 

seemed to be promoted by our Chairman as, again, something political about Florida or New York. What States, what is the feature 

in the States that would uniquely make them eligible for a waiver? 

Mr. LARSEN. The feature is if they have a law or program that 

establishes a package of benefits that insurers have to issue, or insurers issue pursuant to a State program. So there is a small number of States that have these types of programs, one of which is—— 

Ms. SCHAKOWSKY. These are the limited-benefit programs. 

Mr. LARSEN. That is right. 

Ms. SCHAKOWSKY. Yes. So—— 

Mr. LARSEN. And, otherwise, we apply the same regulatory criteria that we apply to all applicants to the States that apply. So 

there has to be a significant increase in premiums or decrease in 

access to benefits if they had to comply with the law. 

Ms. SCHAKOWSKY. OK. The other issue I wanted to deal with, 

there was a charge made somehow that there is skimming in order 

to create your office, and I wanted to talk a little bit about it. 

Mr. Angoff, I wanted to ask you about the Secretary’s authority 

to create the office. Implementing landmark health insurance reform, of course, is a huge job, and following the enactment of the 

Affordable Care Act, Secretary Sebelius established the Office for 

Consumer Information and Insurance Oversight. 

So I think you talked a little bit about the responsibilities of the 

office, but I am more interested in getting to the question really of 

the authority because Representative Burgess questioned that authority. The committee looked into, the staff did some research and 

found that according to the Department’s reorganization plan from 

1953, the Secretary, ‘‘may from time to time make some provisions 

as the Secretary deems appropriate, authorizing the performance of 

any of the functions of the Secretary by any other officer or by any 

agency or employee of the Department.’’ 

So it looks, Mr. Angoff, like the Secretary has had that power for 

nearly 60 years. 

Mr. ANGOFF. That is correct. There is no question about the Secretary’s authority to create the Office. She has such authority. 

Ms. SCHAKOWSKY. Now, I also want to clarify what you said. You 

were saying that there is money in the bill to implement the provisions and that a decision was made about a structure to do that, 

taking money already in the bill. Is that what you were saying? To 

create an appropriate structure. 

Mr. ANGOFF. That is correct. There is $1 billion appropriated for 

the ACA as part of the Act, and then in addition there are specific 

provisions such as the provision authorizing the high-risk pools and 

the provision authorizing the Early Retiree Reinsurance Program, 

which carry independent funding with those provisions. 

Ms. SCHAKOWSKY. Thank you. So I just want to end by saying 

words like skim, I think, are very loaded, they create a very negative feeling that, in fact, all of the money to create this Office to 

help implement the bill was appropriated and in the legislation. 

Thank you. 

Mr. STEARNS. Thank the gentlelady. Does the word fungible work 

better? 

Mr. Griffith, you are recognized for 5 minutes. 

48 

Mr. GRIFFITH. Thank you, Mr. Chairman. I am curious following 

up on that line, you were hired on February 16, but the legislation 

wasn’t passed until March 23. Why not put a line in there that specifically stated that you all were going to have this office? 

Mr. ANGOFF. That is not for me to answer. 

Mr. GRIFFITH. It would have made things a lot clearer, would it 

not? 

Mr. ANGOFF. No, I don’t think so. I mean, I think the provisions 

which Congresswoman Schakowsky cited make it clear that there 

has never been any question about the Secretary’s authority to delegate authority and manage her jurisdiction in the way she sees fit. 

So I just don’t see any issue there. 

Mr. GRIFFITH. Do you know how much money you all spent in 

this endeavor, 252 employees, and I understand you had offices in 

Maryland at one time? 

Mr. ANGOFF. Yes. For fiscal year 2010, $33.4 million is the 

amount that comes out of the billion that was authorized, that was 

appropriated. 

Mr. GRIFFITH. All right, and how much do you anticipate going 

forward? 

Mr. GRIFFITH. That would be Mr. Larsen’s area. 

Mr. LARSEN. We are still working through the 2011 number, so 

I can’t give you that number at this point. In the President’s budget in 2012, we have got, I think $94 million for oversight and consumer assistance and functions like that in the President’s budget. 

Mr. GRIFFITH. And you indicated that—speaking to Mr. Larsen 

now, you indicated that you had an outreach program for folks to 

get into the programs regarding high risk or areas where people 

were—— 

Mr. LARSEN. We are starting that up now. We have not to date 

had a very vigorous outreach program, and I think that accounts 

for the lower-than-anticipated enrollment. So we are going to—— 

Mr. GRIFFITH. My question then would be do you also have an 

outreach program for micro-employers, people that have five or less 

employees? Do you have an outreach program to let them know 

about they can easily access the ability to get a waiver if they need 

one? 

Mr. LARSEN. We don’t have a specific program targeted to types 

of employers, but I would be happy to talk to you about ideas for 

doing that. 

Mr. GRIFFITH. And as we go forward you don’t anticipate there 

being any waivers after 2014? 

Mr. LARSEN. We don’t, because the law wouldn’t allow for limited 

waivers or policies because the restrictions on the annual limits are 

complete at that point, and that is the point at which consumers 

have access to a full array of benefits. 

Mr. GRIFFITH. And in regard to the minimum essential coverage 

penalty, you answered earlier your plan B was this is actually 

going to work and so forth, but how do you anticipate dealing with 

States like Virginia where it has been ruled unconstitutional because of that penalty and the 26 States that are in the Florida legislation—— 

Mr. LARSEN. Right. 

49 

Mr. GRIFFITH [continuing]. That, of course, got its own opinion? 

How do you all plan to deal with that? Are you going to continue 

to charge forward, notwithstanding the legal question which obviously is very serious with, I think, now 27 States having a ruling 

that says that that provision at least is unconstitutional. Now, the 

difference, of course, Virginia not only had a separate piece of legislation but had a separate suit from the others and focused entirely 

on that one part of it. 

But how do you plan to go forward? 

Mr. LARSEN. Yes. I guess I would answer in two ways. First, 

today, right now, we are proceeding with implementation of the 

law, but our lawyers at HHS are, as you can imagine, looking at 

the implications of the ruling and how we will be responding to 

that. So—— 

Mr. GRIFFITH. And I guess my question is what is the plan B if 

ultimately the 27 States that have already gotten a ruling that is 

unconstitutional prevail? 

Mr. LARSEN. Yes. Well, that I can’t speak to. 

Mr. GRIFFITH. Does the plan work without mandatory purchase? 

Mr. LARSEN. Well, I think as been discussed publicly, the individual responsibility provisions are an important part of the architecture of the ACA, but in terms of what happens, I can’t get 

into—— 

Mr. GRIFFITH. Including the penalty provision? 

Mr. LARSEN. I can’t get into what happens in light of the pending 

litigation that we have. 

Mr. GRIFFITH. So there is no plan B? 

Mr. LARSEN. I am not saying there is or there isn’t a plan B; but, 

in matters relating to the litigation that we have with the States, 

we are proceeding with implementation today as I sit here, and I 

will leave it to the lawyers to figure out—— 

Mr. GRIFFITH. Can you let me know when you develop a plan B? 

Mr. LARSEN. We absolutely will. 

Mr. GRIFFITH. Thank you. 

Mr. STEARNS. Thank the gentleman. Mr. Scalise, the gentleman 

from Louisiana, is recognized for 5 minutes. 

Mr. SCALISE. Thank you, Mr. Chairman. I appreciate you calling 

this hearing. Obviously we are trying to get as much information 

as we can about the impacts, unfortunately in many cases, the devastating impacts of President Obama’s health care law that are 

now being felt. 

I want to talk to you first about the child only policies. We have 

been being a number of companies that used to offer child only 

policies that are now getting out of the market because of this law. 

Are you aware, first of all, of that problem of the companies that 

are just dropping this line of business altogether? 

Mr. LARSEN. Well, the Affordable Care Act set up a system 

where, for the first time, insurance companies aren’t going to be 

able to deny care for sick kids, and that was the goal of the Affordable Care Act, and it is unfortunate, frankly, that there are insurance companies that have decided that if they can—unless they can 

only insure healthy kids, they are not going to offer—— 

Mr. SCALISE. So what you are saying you are aware that there 

are companies now that just aren’t offering these health care opVerDate Nov 24 2008 14:18 May 18, 2011 Jkt 037690 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-7 021611\112-7 CHRIS
50 

tions to any parents who want to provide this for their children. 

Are you aware of this? 

Mr. LARSEN. In the small segment of the market there are companies—— 

Mr. SCALISE. Can you tell me how many companies have gotten 

out of this line of business since—— 

Mr. LARSEN. I can’t answer that exact question. I don’t know. 

Mr. SCALISE. You can’t? I mean, I would understand it is your 

job, your Office’s job to follow these effects on insurance injury and 

the ability for people to get access to health care. I would think it 

is your job, so I would think you would know how many. 

Mr. LARSEN. Well, here is what we have done. We have provided 

guidance to States, Louisiana and other States, with a range of options to encourage them to take, in order to maintain a market for 

these carriers that otherwise don’t want to insure sick kids. So, 

they are leaving the market because, unless they can just insure 

healthy people—— 

Mr. SCALISE. Right, and one of our concerns all along, and frankly it was discussed by those of us on this side of the aisle when 

this bill was being debated over the course of the last year and a 

half, that these kinds of mandates and laws that were included in 

Obamacare were going to deny access to people who had health 

care that they liked. And, of course, the President multiple times 

would say if you like what you have, you can keep it, and we pointed out in many cases that because of these changes, they were 

going to actually force a lot of people just out of the market altogether, which would deny coverage to many people who had health 

care that they liked. And so, you don’t know the number of companies now. You are saying that. I would encourage you to go and 

find out how many there are and find out what things need to be 

done to unravel it unless, I guess, you all are more concerned about 

invoking a policy than actually improving access to people who 

want to get health care, because your policies that took effect. 

I see in September of 2010 are what ran a lot of these people out 

of the market altogether, and there are articles that started coincidentally right after the law took effect that talk about all of these 

companies that were offering health care options to children that 

no longer are doing it. So now you have denied access to families, 

parents who had good health care for their kids that don’t have 

that option today. 

Mr. LARSEN. We have not. The insurance companies—— 

Mr. SCALISE. Well, the law did. You personally didn’t do it, but 

Obamacare did, and since it is your job to track these things, I 

would encourage you to go back and take a look. 

Mr. LARSEN. Well, we have worked with the States. We have 

sent guidance out and worked with the States to provide them 

with—— 

Mr. SCALISE. Well, with the States, you are on your own now because families don’t have the same options. They have limited options, and I appreciate maybe you have a difference on the overall 

law. I will say, and I am glad that the Chairman is having this. 

I am a little surprised that some of our counterparts on the other 

side are criticizing us for having this hearing. There is a letter, and 

I would like to get the letter in the record, there is a letter that 

51 

a number of members of this committee wrote last year asking 

then Chairman Waxman to hold a hearing on these kind of problems, and for whatever reason Chairman then Waxman chose not 

to have any hearings, and maybe it is because they didn’t want the 

American people to find out just how devastating this law, 

Obamacare, is on denying access to people today. 

Now, one other area I want to get—— 

Mr. STEARNS. Do you want to put that in the record? 

Mr. SCALISE. And I would like, yes, to ask unanimous consent to 

put that letter in the record, because I think—— 

Mr. STEARNS. Without objection, so ordered. 

[The information appears in the exhibit binder at the conclusion 

of the hearing.] 

Mr. SCALISE [continuing]. It is important to show we have been 

interested in this for a long time. Unfortunately, the folks on the 

other side when they were in charge didn’t want to have these kind 

of oversight hearings where the American people could find out 

that people today are being denied health care that they liked because of this law. 

Now let us get to these waivers. I think probably one of the biggest heights of hypocrisy is the fact that the President ran around 

touting how great this law was going to be, it is going to be wonderful for American people, it is going to reform health care problems. Of course, we pointed out back then all the problems it would 

created. I am surprised at how many people have asked and now, 

I am not surprised how many people have asked. Frankly I think 

everybody would like and should get a waiver from the entire law 

and hopefully the courts will take care of that, but I am surprised 

how many waivers have been granted. 

Can you tell me how many waivers have been granted to companies that said we just, you know, we don’t want to comply with 

some of these sections. 

Mr. LARSEN. Sure. Through—— 

Mr. SCALISE. I am talking about the number. Do you know the 

number? 

Mr. LARSEN. I believe the number that we gave you was 915. 

Mr. SCALISE. OK. The 915. From what I am understanding about 

60 companies have been denied that ability to get the waiver. Can 

you get us the list of those companies that have been denied, and 

even more specifically, I would ask you to submit to the committee 

matrix on the number of companies, the number of employees, if 

you don’t want to include their name for other reasons, I can appreciate that, but at least get us the matrix on the number of companies, the number of employees, broken done by region, and also 

broken down by union versus non-union, because I think a lot of 

small businesses out there that would like to be exempted from 

this haven’t been given that opportunity, you know, and maybe 

there is a line formed at the White House where you have to go 

and get it, but frankly, I think it is the public’s right to know what 

that, what those matrix are and to get that data and who has been 

exempted from this—— 

Mr. LARSEN. We provided that to the committee. 

52 

Mr. SCALISE [continuing]. Was touted as a panacea and is, in 

fact, destroying access to health care for millions of Americans. 

Thanks. I yield back. 

Mr. STEARNS. Thank the gentleman. We are going to go another 

round of questions. If you would engage us, I would appreciate your 

forbearance here. 

The President kept saying during his campaign, if you like your 

health care, you can keep it. He kept saying that as a mantra, but 

wouldn’t both of you agree that without a waiver these people that 

you gave a waiver, they couldn’t keep their health care? Isn’t that 

true, Mr. Angoff? 

Mr. ANGOFF. We don’t know whether those people liked their 

health care—— 

Mr. STEARNS. No, but, I mean, the fact is the President says you 

can keep it, you can keep your health care. If you like your health 

care, you can keep it, but without a waiver, they couldn’t keep it. 

Isn’t that true? 

Mr. ANGOFF. They are keeping it. Keep in mind that in 2014—— 

Mr. STEARNS. Mr. Larsen, isn’t that true, though, basically that 

without these waivers, McDonald’s and these people, they couldn’t 

provide? 

Mr. LARSEN. I agree with Mr. Angoff. The fact is that they are 

keeping it, and the ACA contemplated setting up a system to ensure that people in these low annual limit policies could, in fact, 

keep—— 

Mr. STEARNS. Well, you know, the Democrats are continually trying to defend these waivers, but, you know, what the problem is 

the Administration health care, Obamacare, has created this problem, and now the Democrats are recommending a solution. If they 

didn’t have this problem from the first place, we wouldn’t need this 

solution, which is these waivers. 

So, you know, our response on this side is the only reason you 

have the waiver is because of the new requirements, all these new 

requirements of Obamacare making insurance, providing insurance 

too expense. 

For example, you indicated that you had 915 waivers. 2011, as 

I understand it, the ceiling per year is $750,000 a year. Isn’t that 

true? 

Mr. LARSEN. That is right. 

Mr. STEARNS. OK, and does it go up to $1.25 million roughly in 

the year 2012? 

Mr. LARSEN. That is correct. 

Mr. STEARNS. And it goes up in 2013, to over $2 million. Is that 

roughly true? 

Mr. LARSEN. Yes. 

Mr. STEARNS. So if a person could not make it in 2011, like a 

McDonald’s, aren’t there going to be a lot more corporations that 

are going to come for waivers once they realize that the benefit is 

going to go up from $750,000 to $1.25 million? Don’t you think 

more people will—just logically? 

Mr. LARSEN. That is exactly why we set up a program where we 

are going to have a 1-year—— 

53 

Mr. STEARNS. I understand, but all those people for 1 year are 

going to come back, and then more people are going to come. Then 

the year 2013, it goes to $2 million, and 2014, is unlimited. Right? 

Mr. LARSEN. So what we are doing this year, to answer your 

question, is looking at the very question that you are asking, which 

is what is the best glide path for these types of policies between 

now and 2014, in light of the increasing annual limits that—— 

Mr. STEARNS. It goes to the heart of the whole question is the 

President said if you like your health care, you can keep it, but basically you can’t keep it unless the government gives you waivers. 

Have you done an economic analysis, 2014, comes, right, all these 

companies you have given waivers now must comply. Have you 

done an economic analysis to see what it is going to cost these companies when they have to provide unlimited benefits every year for 

their employees? 

Mr. LARSEN. Well—— 

Mr. STEARNS. I mean—— 

Mr. LARSEN [continuing]. Remember that this—— 

Mr. STEARNS [continuing]. We are seeing these waivers from 

2011, 2012, 2013, 2014 unlimited. I mean, have you done any kind 

of economic analysis? 

Mr. LARSEN. But the vast majority of employer-based coverage 

will, or already does, meet those annual limits. So we are only talking about a very small percentage of the marketplace that has to 

be on a glide path to 2014. 

Mr. STEARNS. Well, I think that I would disagree with you because when you say to a corporation, a small corporation that you 

have got to provide unlimited benefits, I think it is going to make 

it more expensive, and this whole process is just going to be very 

dependent upon high costs at which the government is going to 

have to supplement and pay to cover these. And I think you have 

got the indication of the problem with these waivers from States, 

and if New York gets a waiver, has, I mean, at what point after 

you have given these waivers to large States do we actually see the 

realization that we can’t afford this? 

And so, I mean, we are just talking about escalating the number 

of waivers. 

Mr. LARSEN. Well, I think that is the connection between today 

and 2014. We have a solution in 2014, and we need to make sure 

that this small part of the marketplace gets to 2014, and that those 

individuals as you suggest as the President wants, can continue 

their current coverage. 

Mr. STEARNS. Well, I think for the benefit of acting on what the 

President says, if you like your health care, you can keep it, you 

should have some economic analysis, what is going to happen in 

2014, based upon all these waivers you are anticipating that are 

going to increase. 

Just a last question. How does a corporation know that he, his 

corporation, his benefit, his union can get a waiver? Do you tell 

people? I mean, how does a normal small business find out? How 

did Waffle House find out that they could even do a waiver? Because I think there are many people out there that don’t know they 

can get a waiver, they don’t have the steps to do it. I don’t—are 

you advertising that you can get waivers? 

54 

Mr. LARSEN. When we put the waiver process in place, we put 

out a press release, and we posted the information on the Web site. 

Mr. STEARNS. On your webpage. 

Mr. LARSEN. A number of—that is right. Trade groups, law 

firms—— 

Mr. STEARNS. When did you do that? 

Mr. LARSEN [continuing]. Consultants. 

Mr. STEARNS. How long ago? Did you do it 2 months ago or—— 

Mr. LARSEN. Well, we set the program up in September, and 

then we have had subsequent—— 

Mr. STEARNS. OK. 

Mr. LARSEN [continuing]. Guidance since then and—— 

Mr. STEARNS. So I could advise any corporation in the State that 

wants a waiver to go to your Web page, and they would understand 

how to fill out the forms and do it? 

Mr. LARSEN. Yes. 

Mr. STEARNS. OK. My time has expired. The gentlelady, Ms. 

DeGette. 

Ms. DEGETTE. Thank you, Mr. Chairman. I just want to clarify 

a couple of things. 

The first thing I want to clarify, Mr. Larsen, is Mr. Scalise asked 

you if the information on all of the waivers, the applications, the 

approvals, et cetera, was available, and it is available online. Correct? 

Mr. LARSEN. It is on our Web site. Yes. 

Ms. DEGETTE. So you guys aren’t trying to hide any of that information. Right? 

Mr. LARSEN. No, we are not in any way. 

Ms. DEGETTE. Thank you. 

Mr. LARSEN. We are very—— 

Ms. DEGETTE. The second question I have is, Mr. Scalise was 

talking quite a little bit about the insurance companies after the 

requirement that they couldn’t drop children with pre-existing conditions were leaving the market, in fact, most children are the 

cheapest group of folks to insure if they are healthy. Correct? 

Mr. LARSEN. Correct. 

Ms. DEGETTE. And so really what these insurance companies are 

saying is we don’t want to have to give insurance policies to children with pre-existing conditions or who are sick. Would that be 

a fair interpretation? 

Mr. LARSEN. That is correct. 

Ms. DEGETTE. And the Affordable Care Act as it is phasing in 

now says, you know what, if you are going to offer parents an insurance policy, you have to offer people like Diana DeGette, who 

has a child with Type I Diabetes, an insurance policy just like you 

have to offer everybody else an insurance policy. Isn’t that right? 

Mr. LARSEN. Right. 

Ms. DEGETTE. Don’t you think—well, never mind. I will say what 

I think. I think the parents of America would like to see sick children as well as well children insured. 

Let me ask you another question which is I guess I am a little 

bit perplexed by some of these lines of questioning on the other 

side, because the reason you folks set up these waivers is so that 

States or—well, strike that. So that employers that were offering 

55 

these limited-benefit plans would be able to continue to offer those 

in the transition period before—between now and 2014. Right? 

Mr. LARSEN. Correct. 

Ms. DEGETTE. And if we didn’t have these waivers, then those 

folks would be bumping up against the caps. Correct? 

Mr. LARSEN. For the small percent of the market. Yes. 

Ms. DEGETTE. For the 2 percent of the market that is getting the 

waivers. Right? 

Mr. LARSEN. Correct. 

Ms. DEGETTE. And so it seems to me that what you are doing 

is you are allowing this gap to be filled between now and 2014, for 

people who need those policies. Right? 

Mr. LARSEN. That is correct. 

Ms. DEGETTE. Now, I want to ask you this follows up on this last 

question, and the reason you are not going to need these waivers 

in 2014, is because there are many new tools that are coming on 

deck in 2014, that these employers will be able to have. Is that 

right? 

Mr. LARSEN. That is correct. 

Ms. DEGETTE. I am wondering if you can explain some of those 

tools that we will have and why we will no longer need those waivers for these limited number of employers in 2014, briefly. 

Mr. LARSEN. Well, consumers are going to have a range of new 

options. First of all, there is going to be a ban on all pre-existing 

conditions for all issuers. Everyone can get coverage. Everyone can 

get full coverage. There will be an essential package of benefits. 

There will be options within the exchanges with richer benefits, 

and not as rich benefits, covering still the same set of essential 

benefits. There will be a competitive marketplace where people can 

shop. Competition will increase, and for those who are low-income 

individuals, there will be opportunities for premium subsidies to 

get better coverage that will be affordable for them. 

Ms. DEGETTE. So, in fact, I don’t know if you are aware but the 

non-partisan Congressional Budget Office made a projection, and 

what they said was Americans buying comparable health care 

plans to what they have today in the individual market would see 

their premiums fall after 2014, by 14 to 20 percent, which would 

save $732 on an individual policy and $1,975 for a family policy. 

Most Americans buying coverage on their own would qualify for 

these tax credits that would reduce their premiums by an average 

of 60 percent, even as they get better coverage as they have today. 

And the CBO also estimated that small businesses would see 

premium reductions of 8 to 11 percent and would receive tax credits worth nearly $40 billion over the next decade to help pay for 

coverage. 

Are you aware of the CBO analysis? 

Mr. LARSEN. Generally, yes. 

Ms. DEGETTE. And one last question. According to what you 

know are the benefits that people, that employers are going to have 

to offer after 2014, unlimited benefits? 

Mr. LARSEN. They are not going to be able to have lifetime and 

annual limits on the policies that they issue. 

Ms. DEGETTE. But the limits—are not unlimited. They are going 

to be—— 

56 

Mr. LARSEN. Oh, that is right. That is right. 

Ms. DEGETTE. Thank you. 

Mr. STEARNS. Thank the gentlelady. Dr. Burgess is recognized 

for 5 minutes. 

Dr. BURGESS. Thank you, Mr. Chairman. In the interest of brevity I am interested in the private sector experience that both of you 

have, and perhaps you could provide that to the committee at some 

point so we would be able to review that. 

I want to just close the loop on a line of questioning that I was 

undertaking before, Mr. Angoff. So now we have the situation 

where OCIIO has become CCIIO, and it is located at CMS. Right? 

Mr. ANGOFF. Yes, sir. 

Dr. BURGESS. Just recapitulate and all the functions that I mentioned before are now under the direction of Administrator Dr. Don 

Berwick. Is that correct? 

Mr. ANGOFF. Yes, sir. 

Dr. BURGESS. So CMS, Center for Medicare and Medicaid Services oversees Medicare, Medicaid, SCHIP, and a very significant 

portion of the private insurance market over which it never had 

authority in the past. Is that a valid observation? 

Mr. ANGOFF. Not entirely, in that much of Medicaid and Medicare now is actually run through the private insurance system. 

Dr. BURGESS. But it is all directly—Dr. Berwick is directly responsible for all of those federal programs. 

Mr. ANGOFF. yes. 

Dr. BURGESS. So we have the public and private side by side as 

PPACA phases in. So, again, just to complete the story, we have 

an Administrator at CMS, who parenthetically has never been confirmed by the Senate because he was a recess appointment, so as 

much affection and respect that I have for Dr. Don Berwick, he has 

never come before the United States Senate to undergo the confirmation process. Maybe they will have an opportunity to do that 

before, but he is in charge of almost all insurance coverage in the 

United States of America as PPACA phases in, and it is all going 

to be led by this sub-organization of HHS, CCIIO, that is a follow 

on from OCIIO that was a non-directly appropriated, non-authorized center without clear authority who cannot provide his budget 

to the committee at this time. Is that a fair assessment of the landscape as we—as it exists today? 

Mr. ANGOFF. I don’t think it is fair because I think—— 

Dr. BURGESS. Of course it is. I went to great detail to, painstaking detail to outline it for you. 

Mr. ANGOFF. And Congresswoman Schakowsky went into specific 

detail about the specific provisions which authorize the Secretary 

to delegate her authority, and as I said before, there is a delegation, and we will provide that to the committee. 

Dr. BURGESS. And again, I have been working for several 

months. I would very much like to have that delegation of authority and the budgetary plan under which you have been working, 

Mr. Larsen, under which you intend to work going forward because 

I just think for an entirely new federal agency that is going to have 

this broad of power, and I went through those powers with you, 

this broad a scope and reach over—into the lives of every single 

man, woman, and child in this country, not just now but for the 

57 

next 3 decades, it is appropriate that this committee from time to 

time have some curiosity about just what is going on and kicking 

the tires on OCIIO or CCIIO or whatever it then becomes going forward. 

The Governor of Utah was in town this week and spoke at several places. I know we have been talking about the waiver authority under the mini-med plans, but you are also responsible for setting up the State exchanges. Is that correct? 

Mr. ANGOFF. That is correct. 

Dr. BURGESS. And Governor Herbert had mentioned some difficulty that he was having getting an answer out of CMS or HHS 

on some flexibility that he wanted. Just the administrative flexibility of being able to do things electronically rather than on paper, 

that he estimated would save his State some $600 million a year, 

but he had been waiting from July until this week to get an answer. 

Does that seem a little long? 

Mr. LARSEN. Well, I apologize. I don’t know the details of what 

he is looking for. I know that we have on ongoing dialogue with the 

States and the State Governors. I know Utah has an exchange as 

do one or two other States, and we look forward to working with 

the States. We view the States as our partners on the exchange 

process and—— 

Dr. BURGESS. Well, again, it just looks like July to the day after 

Valentine’s Day seems like a long timeframe to get an answer on 

a relatively straightforward administrative simplification request 

that his State had with the expectation that it is going to save significant dollars for the State. 

And after all, I mean, the gentlelady from Tennessee pointed out 

a big problem for all of us, you guys at the witness table but for 

us guys up here at the dais, in that what do you do going forward? 

All this stuff—you are granting the waivers, you are kind of doubling down on the population as it is coming in. 2014, hits, you flip 

the switch, and no light comes on. What do we do then? 

Mr. LARSEN. Well, I think in 2014—— 

Dr. BURGESS. You are betting on all this stuff working. 

Mr. LARSEN. I think we are going to flip the switch and the lights 

are going to go on, and it is going to be—— 

Dr. BURGESS. But, again, as the gentlelady from Tennessee 

pointed out, where is the plan B? What rational person looks at the 

demographics of the United States of America today with people 

my age who within a very short period of time will be entering 

Medicare, the advancing complexity of what we are able to do to 

alleviate suffering and treat disease, what rational person looks at 

that and says, you know what? In 2014, it is going to cost $500 billion less than it did the year before. I mean, that is crazy talk. 

That is not going to happen. 

It is going to cost more to take care of the Medicare patients 

going forward, and other than waiting lists and rationing, I don’t 

see that you have done anything that is going to be able to control 

costs going forward. 

Mr. Chairman, I appreciate the indulgence on the time. I would 

be happy to hear the answer from either of our panelists if they 

would care to do so. 

58 

Mr. ANGOFF. Yes. I would just like to point out just one rule 

which really already is having an affect, and that is the medical 

loss ratio regulation. The trade press really is reporting that that 

is already having an effect of having companies reduce their rates 

and provide more generous benefit packages to their policyholders. 

So there are already things that are being done, even though it 

has only been in effect for a short while, that are actually driving 

down costs. 

Dr. BURGESS. Yes. With all due respect you were late getting 

that done and let us revisit that in a year’s time and see what the 

story looks like. 

Thank you, Mr. Chairman. 

Mr. STEARNS. I thank the gentleman. The gentleman from Colorado, Mr. Gardner, is recognize for 5 minutes. 

Mr. GARDNER. Thank you, Mr. Chairman, and Mr. Foster, in 

your opening statement that I was able to listen to you mentioned 

that you—it is your goal to allow people to keep the insurance that 

they currently have. That was something that you had said this 

Health Care Bill was attempting to do. Is that correct? 

Mr. LARSEN. Yes. This bill and—yes. 

Mr. GARDNER. And I believe that Mr. Foster, with the Medicare, 

in Medicare has testified before the House Budget Committee that 

that would not be the case, that people would not be able to keep 

the insurance they had. Is he wrong? 

Mr. LARSEN. I have to confess that I am not familiar with the 

testimony that Mr. Foster gave I guess recently in front of the committee. I know that our view is absolutely people can keep the care 

that they have. They are doing it now. I think they will have in 

2014. 

Mr. GARDNER. So your Office is in charge of implementation in 

many of these things that we went through, and Mr. Burgess went 

through a long list with you, Mr. Angoff, of what responsibility 

your Office had. You don’t communicate with the Chief Actuary of 

Medicare? 

Mr. LARSEN. I am not saying that I do or don’t. I am just not 

familiar with the testimony that he gave, and I apologize for this 

particular—— 

Mr. GARDNER. Has the Chief—had Medicare, has he expressed 

concern that—he actually made two statements. He said that it 

probably won’t lower costs and that it will not allow people to keep 

their insurance. Have they expressed that to you? 

Mr. LARSEN. I haven’t heard that from Mr. Foster, but, again, we 

are 2 weeks into this transition so—— 

Mr. GARDNER. How long has your Office been open? 

Mr. LARSEN. We have been in—— 

Mr. ANGOFF. Since April 19. Rick Foster is the Actuary for Medicare, not for the Office of Consumer Information and Insurance 

Oversight. 

Mr. GARDNER. Right, but do you not communicate with Medicare 

in terms of what is happening with the Health Care Bill? That is 

the Chief Actuary who said that these two primary tenants of the 

Health Care Bill aren’t going to come true. That is pretty significant, is it not? Yes or no? 

59 

Mr. LARSEN. Like I said, I apologize. I would be happy to go back 

and review his statements with regard to the area. As Jay said, he 

is the Medicare Actuary. We are the private health insurance market coming into CMS, so we will go back and read his testimony. 

Mr. GARDNER. Mr. Angoff, that is a pretty significant difference 

of opinion, isn’t it? 

Mr. ANGOFF. Opinion is probably the right word. These actuaries 

make predictions. Sometimes they pan out, sometimes they don’t. 

Mr. GARDNER. And so you are just betting that he is wrong and 

you are right? 

Mr. ANGOFF. Again, I haven’t seen—I am unfamiliar with the 

specific testimony that you are referring to. 

Mr. GARDNER. So do you think he is wrong, that people will get 

to keep the insurance that they currently have? 

Mr. ANGOFF. Well, people are getting to keep the insurance they 

currently have. We have got to keep in mind there are 50 million 

people today without any insurance at all. 

Mr. GARDNER. That is not what he said. He said that it is doubtful that they won’t be able to keep the insurance that they have. 

That is his testimony before the House Budget Committee. Was he 

wrong? 

Mr. LARSEN. I don’t know. I have got to take a look at it. 

Mr. GARDNER. Before you if you look into your document file, you 

will notice that there is a letter from the Aspen Skiing Company. 

It is in the document tab that you should have. The document 

states at the bottom that compliance with the PPACA would cause 

the cost to increase substantially, which would render the plans 

unaffordable. Is that correct? 

Ms. VOICE. Document 20 I believe. 

Mr. GARDNER. I am sorry. Yes. Document 20. 

Mr. ANGOFF. I am sure it says what you say it says. 

Mr. GARDNER. And this company did receive a waiver. Is that 

correct? 

Mr. ANGOFF. I would have to look at the list. I can do that if you 

want. 

Mr. GARDNER. Well, they did, and so there are seasonal employees at the Aspen Skiing Company. The letter states that 800 full 

and part-time employees during the summer go to 2,600 employees 

in the winter season—— 

Mr. ANGOFF. Yes. 

Mr. GARDNER [continuing]. And that is what it talks about. So 

in 2014, what happens to the Aspen Skiing Company? They will go 

into the exchanges. Is that correct? 

Mr. LARSEN. There will be a number of options for the employees 

of the company, and they will have an opportunity to get fuller 

health care coverage than they probably have today. 

Mr. GARDNER. And do you believe that the ski resort knows what 

is best for their employees? 

Mr. LARSEN. I don’t understand your question. 

Mr. GARDNER. I mean, do you think that the operator of a ski 

resort is better equipped to determine the health care needs of 

their employees than the Federal Government? 

Mr. LARSEN. Well, I don’t know who is best equipped to make 

that decision. I know that—— 

60 

Mr. GARDNER. So the answer is, no, you think the government 

may be better equipped than the Aspen Skiing Company? 

Mr. LARSEN. No. I don’t think that is what I am saying. I think, 

what we want is, we want people to have full coverage, and my 

guess is that the employees of Aspen would like to have full coverage as compared to limited coverage. 

Mr. GARDNER. So the letter says the plans are specifically designed to meet the needs of seasonal and part-time employees. 

Mr. LARSEN. Right. That is typical of the applicants that we get 

for annual limits waivers. This is probably a very typical application. It is part-time coverage, seasonal coverage. 

Mr. GARDNER. So they might be wrong, though? I mean, we think 

the Federal Government might know better how to provide coverage for those employees? 

Mr. LARSEN. No. I don’t think that is what we are saying. 

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

Dr. Gingrey, you are recognized for 5 minutes. 

Mr. GINGREY. Mr. Chairman, thank you, and to the witnesses let 

me apologize for not being here earlier. We have got concurrent 

subcommittee hearings, both extremely important, and this obviously is an extremely important hearing for me as a position member of the subcommittee and obviously the issue of the area which 

you have jurisdiction over regarding the Patient Protection Affordable Care Act is extremely important to all committee members. 

I think I will focus my attention on the Class Act. I don’t know 

whether that has come up in—from previous questions, but I am 

very concerned about the Class Act, particularly in reference to information that has come out recently in regard to the 

unsustainability, the non-viability of the program as it is designed 

in regard to the monthly premiums and the benefit package. 

In testimony before the Finance Committee yesterday, in fact, 

Secretary Sebelius admitted that long-term care insurance program 

created by Obamacare called the Class Act, is totally unsustainable 

I think she put it. This statement mirrors similar remarks made 

by the Chief Actuary of CMS, Rick Foster, when he testified before 

the House Ways and Means Committee a couple of weeks ago. In 

fact, the President’s Deficit Reduction Commission even cited the 

need to dramatically change or even repeal the Class Act because 

they also found the program completely unsustainable as currently 

proposed. 

Mr. Larsen, the President’s budget proposal asks for $13.4 million for an IT system and another $93.5 million for information, 

education in order to sign American workers up for the Class Act. 

So yes or no, if you will. In light of the Secretary’s statement and 

those posted on your Web site, do you believe the Administration 

should provide proof to the American people before your agency begins signing them up for the Class Program? 

Mr. LARSEN. Well, if I could answer this way, and I hope you will 

accept my apology, the Class Act is not actually part of CCIIO or 

OCIIO, so we don’t oversee the Class Act. In fact, I am aware of 

the issues that you raised, and I know the Secretary spoke about 

this yesterday, but it is not in the purview of the—— 

Mr. GINGREY. Do you have an opinion on that? Can you answer 

that question yes or no? 

61 

Mr. LARSEN. Well, I am not familiar with the issues surrounding—— 

Mr. GINGREY. All right. Mr. Angoff, do you have an opinion? 

Mr. ANGOFF. No, I don’t. The Class Act is part now of the Administration on Aging, and so it is under their jurisdiction. 

Mr. GINGREY. Well, given the Secretary’s dire warning and 

should the Secretary not listen to reason, will the Center for Consumer Information and Insurance Oversight, that is you. Right? Include a disclaimer in its education material to workers stating 

clearly that the Class Act is not sustainable? It is unsustainable? 

Mr. LARSEN. I would be happy to look at whatever proposal there 

is on that. 

Mr. GINGREY. Again, you are punting on this. 

Mr. LARSEN. I am punting. 

Mr. GINGREY. Mr. Angoff, would you like to take the ball and run 

with it? 

Mr. ANGOFF. No, I wouldn’t. 

Mr. GINGREY. You are also a punter. Well, look, let me just comment then, Mr. Chairman, in the remaining time that I have left 

since these gentlemen have stated that this is not under their purview and they don’t want to express an opinion, and I certainly will 

express an opinion. 

Back in, I guess it was in the late ’80s when we had the bill that 

was enacted, catastrophic coverage under Medicare forced on the 

American people, and the seniors just went nuts when they found 

out what it was going to cost them in regard to their part B premiums, and then Ross Stankowsky I think almost had his automobile destroyed in downtown Chicago with umbrellas over that 

bad piece of legislation. 

This is the kind of thing that—why we feel so important to have 

the oversight on every aspect of this bill, all 2,400 pages of it, 

PPACA, Obamacare, however you want to call it, Patient Protection Affordable Care Act, but this is one I think that is very important, even though it is not under your authority specifically, that 

the committee, the subcommittee understands that something like 

the Class Act, it was just part of so much of this bill that was 

thrown together just to get it passed so that hopefully after people 

read the bill they would come to like it. 

They are not going to come to like the Class Act, and hopefully 

we are not going to spend $100 million putting it into effect. 

Mr. Chairman, I will yield back. 

Mr. STEARNS. Thank the gentleman. The gentlelady from Tennessee is recognized for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. I want to go back 

to Mr. Larsen’s answer to Mr. DeGette. 

You continue to talk about, well, come 2014, you are going to 

have all of these wonderful benefits, it is going to be better, it is 

going to be fuller coverage, and, sir, I just have to tell you this is 

our concern. We have lived through this in Tennessee, and it does 

not work. You cannot incentivize use, and there is no way to pay 

for it. Doing this investment on the front end and expecting to get 

savings on the back end, it doesn’t work. And I have got plenty of 

charts here that show you what happened in our State. 

62 

Now, what you have not been able to define for me is how do you 

plan to pay for it? What is going to happen to these innovative 

plans like CoverTN when you get to 2014? How, you know, you 

talk about this exchange market, but I have to tell you, sir, unless 

you can point to a pilot project that has worked, the examples that 

are out there now do not work. You are speaking on theory. Is that 

not correct? Your statement to me was Obamacare would work. 

This plan would work, but you have no data to back it up. You 

have no analysis that says, we ran this program, and we looked at 

it, and this worked. 

So, we are looking at this, and we are shaking our heads. In 

2014, the CoverTN Program would cease to exist. Is that not correct? 

Mr. LARSEN. If I can respond this way, we know the system prior 

to the passage of this bill was broken. Fifty million people without 

insurance. I think there were—— 

Mrs. BLACKBURN. Sir, I am not even going to—I am going to 

jump in, and it is not out of disrespect. It is just that you are talking apples and oranges. There are reforms that need to be placed. 

People want them to be in place as free market, patient-centered 

reforms. When you have tried a public option health care system, 

see, you are avoiding my question. You cannot give me an example 

of where public option health care has worked successfully, and 

that is because you don’t got one. 

Mr. LARSEN. Well—— 

Mrs. BLACKBURN. As they say in Tennessee. You just don’t. Let 

me go onto something else. 

When we are looking at the Center moving from HHS to CMS, 

when was that—why was the decision made? When was that decision made? 

Mr. ANGOFF. I am sorry. When was it made? 

Mrs. BLACKBURN. Why and then when? 

Mr. ANGOFF. Oh. The reason it was made is that it made sense 

to have a separate organization reporting directly to the Secretary 

that had to do a lot of things quickly as an independent organization. Once all—— 

Mrs. BLACKBURN. OK. Who was involved in the decision making? 

Mr. ANGOFF. Sorry? 

Mrs. BLACKBURN. Who? Who was involved in the decision-making process, sir? 

Mr. ANGOFF. Several people at HHS. I don’t know. 

Mrs. BLACKBURN. Several people at HHS. Would you please supply me with a list of those that were involved in that decision making? 

Mr. ANGOFF. Yes, I will. 

Mrs. BLACKBURN. Thank you very much. And why did you not 

start the Office in CMS? 

Mr. ANGOFF. Because it was—we had a lot to get done in a very 

short time, we needed a mechanism to do it, we thought—— 

Mrs. BLACKBURN. OK. 

Mr. ANGOFF [continuing]. The best way to do it would be to have 

an independent organization. 

Mrs. BLACKBURN. OK. 

Mr. ANGOFF. Now that it has matured and all the major regs—— 

63 

Mrs. BLACKBURN. All right, and then when did you decide to 

move it? 

Mr. ANGOFF. In December, late December. 

Mrs. BLACKBURN. OK. Mr. Chairman, I would like to submit for 

the record the letter from Secretary Sebelius on January 5, 2011, 

writing to inform that they were moving it to CMS. I find that date 

to be a little bit curious. 

Mr. STEARNS. Without objection, so ordered. 

[The information appears in the document binder at the conclusion of the hearing.] 

Mrs. BLACKBURN. Thank you, sir. Was any discussion had about 

the fact that by moving the Center into CMS where funding is directed for Medicare and Medicaid that it would either better protect or give less subject to oversight or be harder to de-fund that, 

and would it allow you to run that office more along the vein of 

the 1115 Waiver Program that Tennessee operated TennCare 

under which put the feds in control of how a State would deliver 

their program and basically took those State lawmakers out of the 

process, basically handed State lawmakers the bill, and said, here 

you go. The feds say you have to fund it. 

You know, I find it so curious you did this, and then I look back 

at what has transpired in our State and when I was in the State 

Senate there, and we were trying to figure out how to pay for this 

program and then I went back and read the statement from our 

former Governor who said this would be the mother of all unfunded 

mandates, and you know what, I am beginning to think they are 

about right on that. 

What was your decision for moving that? 

Mr. ANGOFF. I am sorry. What was the question? 

Mrs. BLACKBURN. What was your decision matrix for moving it? 

Why did you move it? 

Mr. ANGOFF. There are efficiencies to be gained by merging the 

two organizations, functions such as—— 

Mrs. BLACKBURN. I thought you just told me you wanted it over 

there because it would be an independent organization and not tied 

to HHS. 

Mr. ANGOFF. At the beginning. 

Mrs. BLACKBURN. Did it have anything to do with funding? 

Mr. ANGOFF. No. 

Mrs. BLACKBURN. Could it easier to protect? Would it eliminate 

oversight? Would it tie the hands of State Legislators? 

I yield back. 

Mr. ANGOFF. No. It was a question of efficiencies. There are overlapping functions, budget, grants, personnel, external affairs, IT. 

Now that the regs have been adopted and the programs established, there are efficiencies to be gained by merging the two organizations. 

Mr. STEARNS. I thank the gentlelady. The gentleman from Virginia is recognized for 5 minutes. 

Ms. DEGETTE. Mr. Chairman, before the gentleman—— 

Mr. STEARNS. Sure. Point of—— 

Ms. DEGETTE [continuing]. I would just like to note—move to 

strike the last—— 

Mr. STEARNS. Right. Or a question of personal privilege. 

64 

Ms. DEGETTE. I just want to note that we have now had two 

rounds of questions—— 

Mr. STEARNS. That is correct. 

Ms. DEGETTE [continuing]. And the Chairman is proceeding to 

the third round of questioning. 

Mr. STEARNS. That is correct. 

Ms. DEGETTE. I object to that because I believe these witnesses 

have thoroughly and adequately answered all of the questions put 

to them regarding their agency and the waivers that have been 

granted, and I think now what we are moving into is the majority 

is using this hearing as a way to attack the Affordable Care Act, 

and frankly, I think it is abusive to the witnesses. 

Having registered that objection, you are the Chairman. You are 

going to do what you want, and I will reserve any time I have in 

this third round of questioning until the conclusion. 

Mr. STEARNS. And I thank the gentlelady. You know, this is our 

first hearing really. We have only been here 21⁄2 hours for this 

huge new government program, so I think Members having a 

chance for the first time to do this is very reasonable, and I think 

the witnesses are doing an adequate job as best they can to explain 

it, and I think it is worthwhile to Members who perhaps had not 

been able to ask questions, come back, and so we are going to continue. 

So, Mr. Griffith. 

Dr. BURGESS. Mr. Chairman, if I might—— 

Mr. STEARNS. Sure. 

Dr. BURGESS. [continuing]. Just make a point of personal privilege—— 

Mr. STEARNS. Yes. 

Dr. BURGESS. [continuing]. As well, it is far less abusive to not 

make the witnesses listen to opening statements from every member of the committee as we did during the last Congress. 

I will yield. 

Ms. DEGETTE. I will agree with that. 

Mr. STEARNS. I think Ms. DeGette will agree with that. 

The gentleman from Virginia. 

Mr. GRIFFITH. Just to note, this is only my second time, but anyway—no, no. I was here. I just didn’t get my first and second—I 

was here. This is just my second, though, and I am the last one, 

but it is only my second time. 

We talked earlier, Mr. Angoff, about the $33.4 million in expenses and that that came out of the $1 billion appropriated or 

that was mentioned in the Act. 

Mr. ANGOFF. Yes, sir. 

Mr. GRIFFITH. And at one point in the questioning with someone 

else you indicated that there were three sources of money from 

which you could get your funds, the $1 billion in the Act, the highrisk area, and the early retirees. And when I asked the question, 

and I am not trying to make any accusation, I am just saying that 

you said there was $33.4. Did that include all the pots of money 

or just the billion? 

Mr. ANGOFF. No. That $33.4 million is only out of the billion. 

Mr. GRIFFITH. What monies came out of the other two sources? 

65 

Mr. ANGOFF. There is additional money coming out of those two 

sources, and I don’t have that with me. 

Mr. GRIFFITH. Can you get that for us? 

Mr. ANGOFF. Absolutely. 

Mr. GRIFFITH. OK, and I do appreciate that there were additional 

monies. 

Now onto the $1 billion it is interesting because the waiver program, can you tell me how much just the waiver program costs? 

Mr. ANGOFF. No, I can’t. 

Mr. LARSEN. I don’t have that broken out by the staff that work 

on the waiver program compared to the entire $33 million. We can, 

you know, try and get that to you. 

Mr. GRIFFITH. If you can do that for me, I would appreciate it, 

and here is the point, and I touched on this in my previous questioning. We have got this giant Act. Now, while it does have the 

catchall that the Secretary has the authority to, you know, implement, and it has the $1 billion in the back of it, it doesn’t actually 

have waiver in here. 

And I guess my problem is is that one of the things that I fear 

is is that part of the distrust that people have in general is that 

when you have a gigantic Act it is hard to figure it out, and then 

you can’t find things, and it looks like to me what we have done 

is we have built a program based on the Secretary’s authority to 

try to implement the law and then we have bootstrapped back in 

that she can use the $1 billion to implement the law, but we have 

got layer upon layer of interpretation, and that might be OK if this 

was a 5-page bill and you could say, well, we couldn’t get it all in 

here, but I mean, we have got this, you know, it is a textbook in 

length. It is 1,000 pages this way. It was more than 2,000 pages 

when it was in bill form. 

And so I just have great concerns that we are building assumptions on top of assumptions, and it may very well be the fault of 

Congress for not having been specific in past years going back not 

just during this bill but many other bills, but it seems to me that 

we are the ones that ought to be making the laws and that if there 

is something that is unclear, it ought to come back to the Legislative Branch. In this case that would be United States Congress. 

And I just wonder if you had any comments on that. 

Mr. ANGOFF. Just this. On the waiver issue there is language 

there that makes it clear that statutory language, not regulatory 

language, in the statute that says that the restricted annual limits 

should be interpreted in a way so that people can keep their coverage. Everything that we have done is done pursuant to specific 

language in the statute. 

Mr. GRIFFITH. Well, and I guess the concern that I have is we 

are spending money to notify folks of part of the program, but we 

are not spending money yet to let folks know about the waivers, 

as I mentioned earlier, and while we have given McDonald’s a 

waiver, I don’t know how they work their system, but I have a letter from a constituent of mine who owns several Burger King establishments. He is panicked about how this is going to impact 

him, and I, of course, as soon as I get back to the office I will notify 

him of the waiver program. I am not sure he knows about that. 

66 

And so, that is what happens when you make things so complex, 

and you can’t find it in the written word. You have to go to an assumption made on an assumption made by an attempt to try to implement something that apparently the legislation wasn’t crafted 

as well as maybe it should have been. I wasn’t here, so I didn’t 

take part in that, but it just seems to me that there is an awful 

lot of confusion out there, and we are spending money on some 

things based on assumption what we are supposed to do, and we 

are not spending it on others. And it would seem to me that we 

would want consumers to be aware of the waivers as well as to be 

aware of knowing how they get into any of the other programs. 

I yield back the remainder of my time, Mr. Chairman. 

Mr. STEARNS. I thank the gentleman. I dare say that if you took 

an ad and put it in the Final Four basketball, announcing to the 

American public that they can receive waivers from the 

Obamacare, I think you would be offering waivers well in adjustment of 915, because I think as the gentleman from Virginia had 

indicated, a lot of people don’t know that you can get these waivers, 

and they are not going to your Web site. 

But lo and behold if you told all 50 States in a very clear manner 

and you told all the corporations in America that they could get a 

waiver, I think everybody would do that, and they would want to 

waiver every year, and they would want to waiver in 2014. 

The ranking member mentioned about the new tools coming on 

in 2014, and Mr. Larsen consumed a little bit of time talking about 

the ranges of these new benefits, but I guess, Mr. Larsen, who is 

going to pay for those benefits? Because the benefits are all inclusive, and lo and behold, the taxpayers or the corporations are going 

to have to charge more money. 

And she also indicated that she was concerned about recently 

that a lot of sick children were not being insured, but—before 

Obamacare, but the reason a lot of people now are pulling back is 

because, frankly because they are concerned about these benefits 

going from $750,000 up to $1.2 and $2.2. I mean, that is a little 

bit of a chilling factor for a lot of companies, so they are deciding 

that they don’t want to insure, and I don’t think they know about 

the waivers. 

I guess I want to ask you a little bit of question, Mr. Larsen, 

about some of the spending here. How much money in total has 

HHS spent so far in setting up and operating your Office? Can you 

just give me an estimate? Just approximate. 

Mr. LARSEN. Yes, and I think Jay touched on this earlier, of the 

$1 billion that was appropriated at the outset of the implementation of the ACA—— 

Mr. STEARNS. So it is about a billion dollars? 

Mr. LARSEN. Well, that—no, no, no. 

Mr. STEARNS. OK. 

Mr. LARSEN. Thirty-three million is the answer—— 

Mr. STEARNS. OK. 

Mr. LARSEN [continuing]. Spending to date for OCIIO, now 

CCIIO. 

Mr. STEARNS. So $33 billion—— 

Mr. LARSEN. Million. 

Mr. STEARNS [continuing]. From all sources. 

67 

Mr. LARSEN. I am sorry. Did I say billion? 

Mr. STEARNS. Billion? 

Mr. LARSEN. No, $33 million—— 

Mr. STEARNS. Thirty-three million. 

Mr. LARSEN [continuing]. Out of the $1 billion. 

Mr. STEARNS. All right. I respect that. OK. Now, I think our staff 

is a little non-plussed here because $33 million seems like a pretty 

small amount. Does this include all the sources of funding? 

Mr. LARSEN. Well, that is essentially to operate the 252 and the 

programs. I think this was earlier—— 

Mr. STEARNS. Two hundred and fifty-two employees out of Bethesda? 

Mr. LARSEN. Right. 

Mr. STEARNS. Are they still out in Bethesda? 

Mr. LARSEN. Yes. 

Mr. STEARNS. OK. You seem a little puzzled. Have they moved 

since you left? You were a little puzzled. 

Mr. LARSEN. I didn’t know whether you knew something I didn’t. 

No. They are still out there. 

Mr. STEARNS. OK. How did HHS come up with $465 million for 

implementation of the President’s budget for HHS? Do you know 

that? 

Mr. LARSEN. Well, I know—— 

Mr. STEARNS. Either one of you know that? 

Mr. LARSEN [continuing]. Generally, the breakdown, because I 

know which part is attributable to the CCIIO-related activities. 

There is about $94 million for oversight and consumer information, 

which includes the Healthcare.gov Web site, which is a fantastic 

consumer tool. People can go in today and find out what policies 

are available to them, what coverages, what options are available. 

So it includes that money. There is consumer assistance, setting up 

the appeals unit again, so consumers that have been denied, they 

are going to have an appeal process. 

So there is $94 million associated with all of those activities and 

then, of the $400 million figure you mentioned, there are exchanges. We are now standing up the exchanges. We have got IT 

programs that we have got to get up and running. 

Mr. STEARNS. Yes. 

Mr. LARSEN. So I think that is the composition of the request in 

the President’s budget. 

Mr. STEARNS. You asserted that these waivers are necessary between now and 2014, to help people retain their coverage until they 

have access to comprehensive coverage through the exchange, but 

isn’t it true that these plans and employers have access to comprehensive coverage now, but it is just too expensive and so that 

the employees themselves choose a lower-cost plan? 

Mr. LARSEN. Well, it is a good question. It is not always clear 

why employers offer different levels of coverage and, certainly, in 

some cases, they are aware that their employees can only afford— 

because they may be part-time workers or seasonal workers, can 

only afford benefit packages that have limited benefits. 

So, that is what we know today. There is a range of options—— 

Mr. STEARNS. Yes. 

68 

Mr. LARSEN [continuing]. But sometimes many of them aren’t affordable. In 2014, I think we are going to have a better set of options available for employees and employers. 

Mr. STEARNS. I guess the question is do you and perhaps Mr. 

Angoff think that the comprehensive coverage that we mandated in 

2014, through the exchanges or offered by employers, do you think 

they will be less expensive and more affordable than it is today? 

Based upon what we are saying and all these waivers and—— 

Mr. LARSEN. Yes. You know, there are—— 

Mr. STEARNS. Don’t you think—— 

Mr. LARSEN [continuing]. Offsetting factors at play because, 

when you bring, when you expand the insurance pool, you are 

going to bring down costs because now you have a full pool, and 

the exchanges also reduce administrative expenses because all the 

time and money that insurance companies spend today underwriting people and trying to figure out how not to provide coverage 

with the—without having the pre-existing condition, having a preexisting condition exclusion ban, so there are a number of factors 

that help to bring the cost down in 2014. I think that was referenced even in the—— 

Mr. STEARNS. Mr. Larsen, in all deference to you, you say these 

based upon your opinion, that you think that it will bring the cost 

down and so forth, but if you look at countries that have a government universal health care plan, the costs have not come down, 

and in fact, the costs have gone up, and many countries now are 

trying to get from out—from underneath the universal government 

health care. And there is a long line. 

So is there any study or any analysis that you have done to corroborate what you have just indicated that you think—— 

Mr. LARSEN. Well, I know—— 

Mr. STEARNS [continuing]. Through this universal magic wand 

that everybody is going to get cheaper and more coverage. 

Mr. LARSEN [continuing]. Even—back to your earlier question—— 

Mr. STEARNS. Because, see, basically, in my opinion you are putting price controls by—people are asking for waivers because you 

are putting in price controllers. You are saying basically these people got to comply with this or else, and those people are saying we 

need waivers. 

So it is a form of price control. You might not agree, but when 

you do that, then what happens is you don’t have the opportunity 

for the market to bring it down because the government is putting 

all these mandates down. 

So I am just philosophizing—— 

Mr. LARSEN. Well, I think—— 

Mr. STEARNS. So the question is, do you have an analysis to 

show, to back up, corroborate what your analysis is? 

Mr. LARSEN. Well, here is what we do know. 

Mr. STEARNS. Do you have an analysis? 

Mr. LARSEN. Consulting firms like Hewitt and Mercer looked at 

the impact of the ACA on employer-based coverage and found the 

impact might be in the 1 to 2 percent range, because most coverage 

is meeting the requirements of the ACA, but we want to raise the 

bar for everyone—— 

69 

Mr. STEARNS. OK. 

Mr. LARSEN [continuing]. So the financial impact on premiums 

has been in the 1 to 2 percent range, and that is offset by the benefits that consumers get. They don’t have cost sharing now for preventative services. So their out-of-pocket expenses are much less 

now than they were before the passage of the—— 

Mr. STEARNS. All right. My time has expired. 

Dr. BURGESS. Thank you. Just a couple loose ends to tie up, and 

it may not even take the full time. 

There was some discussion, Mr. Stearns, and you with Ranking 

Member DeGette about new tools versus new benefits. New tools, 

one thing, new benefits certainly are a cost driver, so when you flip 

the switch in 2014, and all the lights do come on on all the new 

benefits, it is—there is going to be increased cost. 

So have you done an economic analysis on what is going to be 

the effect on companies that are having difficulty meeting the financial obligation today and require a waiver, they have got new 

tools or new benefits, which means new costs? Have you done an 

economic analysis, or can you point us toward a single study that 

shows how that is going to work? 

Mr. LARSEN. I know it is subject to disagreement, but the CBO 

estimated that the bill is going to lower overall health care costs 

for many of the reasons that we have talked about. 

Dr. BURGESS. Well, OK. So they did, and that is the point of 

some disagreement. 

Actually, I had a resolution of inquiry the last Congress and had 

the Democratic Chairman accepted it, we could have had Mr. Foster in to talk about just that, because I was concerned that Congress voted on a bill without knowing the actual cost. Mr. Foster— 

Mr. Elmendorf had dramatically different cost estimates, about a 

$450 billion spread over 10 years as I recall, and that was pretty 

significant. 

But we never got an opportunity to do that. Perhaps, Mr. Chairman, we will get to do that make up. 

Now, Mr. Angoff, you actually said that I was mischaracterizing 

things when I said that the Office of Consumer Information and Insurance Oversight skimmed from the appropriations, the $1 billion 

for appropriations when you were setting up the Act. So let me rephrase my question so it won’t be a mischaracterization. 

Would it be inaccurate for anyone to say that, for example, $5 

billion was set aside for subsidizing the high-risk pools? 

Mr. ANGOFF. No. That is accurate. 

Dr. BURGESS. But because you used some of that figure for your 

Office for start-up costs, then the entire $5 billion was not available, was it? 

Mr. ANGOFF. And that is the intent because the language says 

$5 billion is authorized to carry out the provision. 

Dr. BURGESS. Oftentimes we have a limiting amount that only 5 

percent can be used for administrative function, but there was no 

such limitation in this case, was there? 

Mr. ANGOFF. That is right. 

Dr. BURGESS. So, again, I point to the fact that it would be great 

to have that budgetary information, that detailed budgetary information. 

70 

Now, you were hired a year ago as we have already established, 

and you were involved in the outline of the development of the creation of OCIIO, the predecessor of CCIIO or whatever it is. I get 

confused. Who appointed you? 

Mr. ANGOFF. The Secretary. 

Dr. BURGESS. And who advised the Secretary on the creation of 

the Office of Consumer Information and Insurance Oversight? 

Mr. ANGOFF. I did not. 

Dr. BURGESS. Do we know who? 

Mr. ANGOFF. I don’t know. 

Dr. BURGESS. You had a Deputy at the time. Was the Deputy involved in providing that advise to the Secretary? 

Mr. ANGOFF. My Deputy? 

Dr. BURGESS. Yes. 

Mr. ANGOFF. Not to my knowledge. 

Dr. BURGESS. Well, who decided that it was a good idea to put 

it in the Secretary’s office? 

Mr. ANGOFF. I don’t know. 

Dr. BURGESS. Well, we have already established that there was 

a reason then to move it to CMS. Mr. Larsen, can you help us with 

that just a little bit more why it was so important to have it freely 

mobile within HHS at one point and then suddenly bring it under 

the control of CMS? 

I got to tell you with all due respect it does look like we were 

trying to move things around, and it was because this committee 

indirectly started asking questions about what was happening and 

beginning to shine a little light on the activities, because I got to 

tell you, most members of Congress were blissfully unaware, Mr. 

Angoff, of your activities last fall. 

Mr. LARSEN. I would characterize it this way. I hope this is helpful. It is kind of the difference between a startup and then running 

the operation. They had to start this thing up from scratch. 

Dr. BURGESS. And I don’t dispute that, but it is just interesting 

that after the questions started to get asked when the discussion 

was made—— 

Mr. LARSEN. They weren’t connected. We concluded that—— 

Dr. BURGESS. Let me ask you this, Mr. Angoff. We had a nice discussion in November, and I was concerned, if I got a constituent 

back home that says, well, I want one of these waivers, how do I 

get one? And it actually wasn’t available on the Web site that, at 

that time. It was shortly after our visit that that information did 

become available on the Web site, so I am greatly appreciative that 

you did that, but as you were developing this, why was there not 

more thought given to how do we get this out to just the regular 

guy on the street who may run a small business or a restaurant 

or may need this waiver? 

Mr. ANGOFF. Well, we did give it some thought. As you said, it 

is on the Web site now. It is a transparent process, and we think 

it has worked well. 

Dr. BURGESS. But, again, this was all in the works for some time, 

and it just strikes me as odd that you wouldn’t have had that one 

simple feature out there early on to make this more accessible to 

more people. Obviously it is a very popular waiver program, very 

71 

popular, and many people want to participate in it, and again, I 

dare say they will still want to after 2014. 

Mr. Chairman, I yield back. 

Mr. STEARNS. All right. Mr. Griffith from Virginia is recognized 

for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. Let me ask you this in 

regard to the shift. I think I heard earlier that part of the reason 

for that was that there were would be efficiencies gained. I have 

also heard there were 252 employees. I am wondering how many 

employees have been let go or been transferred subsequent to the 

shifts in the attempt to make efficiencies. 

Mr. LARSEN. Sure. Well, I guess a couple of answers. One, we are 

in a 60- to 90-day transition period. We have a transition team 

from CMS and a transition team from our shop working together 

to nail down these efficiencies. We don’t anticipate laying people 

off, but as Jay mentioned there are certainly areas where we 

don’t—we are not going to staff up in the future, for example, and 

we have got to figure out what exactly that staffing level is going 

forward. 

So we are right in the middle of that process from a staffing perspective. 

Mr. GRIFFITH. So you made the move for the efficiencies, but we 

don’t know what—how much you are going to—— 

Mr. LARSEN. Well—— 

Mr. GRIFFITH [continuing]. How many employees you are going 

to be able to save, how many spots you are going to be able to reduce? 

Mr. LARSEN. Well, let me rephrase that. We are not talking 

about necessarily reducing—meaning laying people off. I mean, we 

have told our people we are not laying people off, but as attrition 

comes in and as we get efficiencies with the budget people and with 

the legislative office and with the programs office, there is—— 

Mr. GRIFFITH. So you are planning to do it through attrition, but 

do you have any idea what your target—how many—— 

Mr. LARSEN. That is—no. 

Mr. GRIFFITH [continuing]. Spots you wish to get of? 

Mr. LARSEN. That is what we are working—we are, literally as 

we speak, working through the exact components. 

Mr. GRIFFITH. And I am new to the Federal Government but 

wouldn’t it make sense to have some idea of what—how many folks 

or how many spots you were going to eliminate if the reason for 

shifting was efficiencies—— 

Mr. LARSEN. Well, we didn’t—— 

Mr. GRIFFITH [continuing]. Before you made the shift? 

Mr. LARSEN [continuing]. Go in with a hard and fast number 

about what we want to save. We clearly understood as we were 

continuing to stand up OCIIO,and that we need to have functions 

here, and that CMS has those functions, and those—— 

Mr. GRIFFITH. Let me shift gears. 

Mr. LARSEN. Sure. 

Mr. GRIFFITH. Isn’t it true that the employers’ plans which have 

received these waivers are likely to drop coverage for their employees is no longer affordable in 2014, finding it cheaper to pay the 

penalty, if applicable? 

72 

Mr. LARSEN. I don’t think so. 

Mr. GRIFFITH. Well, the CBO estimates approximately three million employees will be dropped by their employers into the exchanges, and in that circumstance won’t the individuals be forced 

to buy a more comprehensive plan at a greater cost to themselves 

and at a greater cost to the taxpayer if that premium then has to 

be subsidized through the exchange? 

Mr. LARSEN. Well, they will have an option for better coverage, 

and if they meet the guidelines for subsidies, then they will have 

the opportunity to get that coverage, but that is paid through the 

various sources as you know, the funds, the Affordable Care Act. 

Mr. GRIFFITH. But isn’t it correct that if there are, in fact, three 

million employees that are dropped, that that is going to put some 

burden onto the exchanges and the subsidies? 

Mr. LARSEN. Well, it means there would be more people there, 

but I think, as we have talked about, there are a number of aspects 

of the ACA that reduce costs overall, so I think those costs are 

going to be manageable and affordable for people in those policies. 

Mr. GRIFFITH. But as Mr. Angoff said earlier when he didn’t like 

somebody’s opinion, actuaries just give you opinions and then you 

have to see if they are right. This would also be the case with what 

you have just said. We have to see whether or not those actuaries 

are right, and many times they are not. Isn’t that correct? 

Mr. LARSEN. Well, if you have two actuaries, there is always the 

possibility—— 

Mr. GRIFFITH. One of them is going to be wrong. 

Mr. LARSEN. Right. 

Mr. GRIFFITH. I yield back my time. 

Mr. STEARNS. I thank the gentleman. Before I recognize the gentleman from New York for 5 minutes I ask unanimous consent to 

put this into the record, a letter from Kathleen Sebelius. 

Without objection, so ordered, and it is dated January 5, 2011. 

[The information appears in the exhibit binder at the conclusion 

of the hearing.] 

Mr. STEARNS. The gentleman from New York is recognized for 5 

minutes. 

Mr. WEINER. Thank you, Mr. Chairman. I have been watching 

with some interest in—my office has been trying to do the appropriation bill on the floor at the same time. 

I just want to try to set this up a little bit. You know, we have 

this tendency to believe that this debate is about health care, and 

to some degree it is, but what it is really about is how we pay for 

the health care we get. I mean, isn’t it true, Mr. Larsen, that if 

someone is struck by lightening and they are lying on the street, 

that an ambulance will come and pick them up, that a doctor will 

try to resuscitate them, if they need surgery, they will probably get 

it, but the question becomes how it is we pay for that care and how 

we insure certain minimum standard of care. 

Is that right, Mr. Larsen? 

Mr. LARSEN. That is correct. 

Mr. WEINER. And are there not really three possibilities? One is 

the employer-based model, which is we pay premiums to an insurance company, they set the rules, they set the standards, we go to 

them, we pay them, and they pass the money along to the hosVerDate Nov 24 2008 14:18 May 18, 2011 Jkt 037690 PO 00000 Frm 00080 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-7 021611\112-7 CHRIS
73 

pitals, to the doctors, to the ambulance driver, and then they take 

a certain amount of profit. 

The second model is the one where basically you don’t have a private company passing along costs. A government agency kind of 

does that. For example, Medicare is like that. No government officer, Mr. Larsen, is paid to be the doctor. It is just a matter of how 

we are paid for that care. 

And then there is the third traunch of people which have no coverage whatsoever. They are the people that don’t have any insurance whatsoever, and we hope and hope and hope they have money 

in their own pocket to pay for that care, but if they don’t, isn’t it 

true, Mr. Larsen, that what would wind up happening is we are 

stuck with some tough choices. We can say to the hospital doctor, 

tough. You got to suck it up, and sometimes hospitals go out of 

business. We lost 17 hospitals, Ms. DeGette, in New York just since 

the year 2000. 

Or we can say, you know, let us come up with some kind of reimbursement program, own reimbursed care. Different States have 

different rules, the Federal Government has different rules. Or we 

can do this. We can say to the taxpayer, why don’t you pay it, and 

we will figure out later on how we need to work that, and that is 

why States get stuck with such a large cost, localities get stuck 

with large costs. 

When we had this discussion about how to come up with a system for dealing with those people that are uninsured, what did we 

do? We didn’t go for the model that someone like I would have 

liked, which is let us say like Medicare, for more Americans, eventually covering all Americans. We went with basically a free-market model and said, let us try the employer-based system. Let us 

try to offer people both incentives, subsidies, and then if they don’t 

do it, we are going to say to them, you know what? You can’t pass 

your bills along to everyone else. You are going to have to pay a 

little extra if you are going to do that. 

Wasn’t it, in fact, the system that we set up a reliance upon the 

market-based model, the free-market model that says insurance 

companies, you go do this work? Wasn’t that basically the path we 

followed here, Mr. Larsen? 

Mr. LARSEN. Yes. 

Mr. WEINER. And further, Mr. Larsen, do not insurance companies, and they are not venal people. They are in a business. They 

are in a free-market business. Do they not make the most profits 

if they take in the highest amount of premiums and pay out the 

least amount in care? Don’t they then make the most profit? 

Mr. LARSEN. Yes. 

Mr. WEINER. And isn’t the model today structured to incentivize 

them to do that? The problem is, Mr. Larsen, and Mr. Angoff, is 

that that model is not necessarily in the interest of our constituents or good care. 

I will give you an example. What if they decide we don’t want 

to cover preventative care, or we don’t want to cover people for the 

entire life of their illness. We just want to cover the first couple of 

days. They are going to make more money. Their stockholders are 

going to do well. That company is going to do well, but it is not 

necessarily in the best interest of the American people, whether 

74 

you are in a Republican congressional district or a Democratic. 

Sometimes we want to say to them, you know what? We want to 

have some standards we want you to uphold. We don’t want you 

to go out of business. We have socked it in on this process. We obviously want insurance companies to do well to make a healthy profit. We want them to be around for years to come. 

But the question is should we say to them, maybe we should put 

basic requirements that if that guy is lying on the street, you can’t 

look at him and say, oh, I don’t think this guy is going to be a good 

deal and have the insurance company keep driving by. No, of 

course not. We got to be able to make coverage. 

And you know what? They are doing remarkably well. Let us 

face it. If you bought insurance company stock at the beginning of 

the recent downfall, you would still be doing pretty well because 

people keep getting sick, people keep getting struck by lightning, 

people keep needing that care. They are doing OK. As a matter of 

fact, if you want to find the easiest, let us say $300 billion or so, 

you can take out, you can transfer in health care costs to better 

care and reduce taxes for people. You might want to look at the 

percentage of the health care budget that we put to insurance company profits. 

So the idea that somehow government is coming in and imposing 

some government solution, there is not a single government doctor 

that has been hired, a single government nurse, a single government operator of an X-ray machine. But that doesn’t mean we 

should simply say you are unfettered by any regulatory force. 

For all of the talk about let us have transferring of being able 

to buy insurance policies over State lines, none of my Republican 

friends have said, let us get rid of State insurance commissioners 

and State insurance regulations because we acknowledge we need 

some basic regulations. 

Mr. Larsen, is that basically in a broad form what your office has 

been spending part of its time doing? 

Mr. LARSEN. Yes. 

Mr. WEINER. Thank you, and I await a second round, Mr. Chairman. 

Mr. STEARNS. All right. The gentleman has advocated strongly 

for Medicare as a solution, so he has made that argument all during our markups, and I think he—and I appreciate him coming 

down. 

I think what we are going to do, we are finished the rounds. I 

thought the ranking member would have a chance to close, and 

then I would say a few—— 

Ms. DEGETTE. I would ask unanimous consent that—— 

Mr. STEARNS. Objection. Just let me just clarify. Generally when 

we do the rounds, a member has to be here. So—but if the member 

shows up in the beginning and then goes to the restroom and 

comes back, then that is OK, but if someone comes at the very 

end—I think your eloquent goes to the equivalent of three. 

So at this point I think we are going to have—we have been here 

3 hours, and we are going to let the ranking member conclude, and 

then I will say a few closing comments, and we appreciate the witnesses bearing through the rest of us. 

Go ahead. 

75 

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

couple of questions to clarify. I guess I would ask either one of you 

gentlemen, if this agency was moved because of any action that 

this Oversight and Investigations Committee or the Energy and 

Commerce Committee in general made? 

Mr. ANGOFF. No, it was not. 

Ms. DEGETTE. And why was it moved? 

Mr. ANGOFF. It was moved because there are efficiencies to be 

gained, as we mentioned, in such functions as budget, personnel, 

external affairs, IT, and other front office functions. There are efficiencies to be gained. 

Ms. DEGETTE. So it was actually done to make the program operate in a more efficient manner? 

Mr. ANGOFF. That is correct. 

Ms. DEGETTE. Now, there was some question about the agency’s 

budget, and I just wanted to clarify. As I recall, the HHS overall 

budget request was about $79 billion, and from what I have heard 

is that your Office’s budget, Mr. Larsen, is roughly about $330 million for 2012. Is that correct? 

Mr. LARSEN. Yes. 

Ms. DEGETTE. So of that amount that would—of the CMS budget, which, of course, is much smaller than the overall HHS budget, 

your budget request would be around $7.5 of the CMS budget request and less than one-half of 1 percent of the overall HHS discretionary budget request for 2012. Is that correct? 

Mr. LARSEN. Correct. 

Ms. DEGETTE. And what your agency is doing by giving these 

waivers, it is working with companies, both private companies and 

also group plans, to give them appropriate waiver so that they can 

give insurance to their employees during the gap between now and 

2014, when those employees will be having more options. Is that 

correct? 

Mr. LARSEN. That is correct. 

Ms. DEGETTE. Mr. Chairman, I will yield my remaining 2 minutes to Mr. Weiner. 

Mr. WEINER. While you are here, can you clear up a couple of 

things? I understand in the Health Care Act we hired 16,000 IRS 

officers. That is not true, is it? 

Mr. LARSEN. I don’t know. 

Mr. WEINER. Yes. That was one of those made-up things. I actually wanted a couple of moments to tick off the made-up stories 

about the health care, but I realize 2 minutes and 48 seconds will 

barely tip the iceberg, but let me just—that is one of the stories 

that is made up, 

Secondly, there is this notion about the Health Care Act that has 

been perpetuated widely that government is going and taking over 

health care, government takeover of health care is said over and 

over again. 

Under the Act today, under the Act today, or under the Act when 

it is implemented, will there ever be a situation where there will 

be a government employee, a government employee telling a doctor 

what process or processes that they can offer to a patient? 

Mr. LARSEN. Not to my knowledge. 

76 

Mr. WEINER. However, there still will be, because we have private insurance companies, still will be insurance companies that 

are going to have broad discretion to be jackasses with their customers. Right? You can’t—there are still going to be people, they 

are still going to keep you on hold for hours. There is nothing in 

the bill that prevents that. Right? 

Mr. LARSEN. If your question is does it preserve the private market for insurance companies, yes. 

Mr. WEINER. Yes. You are much more delicate than I am, Mr. 

Larsen. 

Let me ask you another question. There is this notion that we 

are paying a couple of years, we are paying 10 years of taxes for 

6 years of service. Isn’t it true that today as we speak that senior 

citizens have—that senior citizens are getting help reducing the 

cost for prescription drugs, the so-called donut hole? Isn’t that true 

that that is true today, this second? 

Mr. LARSEN. Yes. 

Mr. WEINER. Is it also not true that under Medicare processes 

that used to be subject to a co-payment are now not covered—that 

now do not—or has that not taken affect yet? 

Mr. ANGOFF. No, that is in effect. 

Mr. WEINER. That has. That is today? 

Mr. ANGOFF. Yes, sir. 

Mr. WEINER. Year—basically year 1, week 1, month 1 of the new 

Health Care Act. 

Let me finally ask you in the remaining 60 seconds about the 

idea of the death panel. What section or line is the death panel in? 

And just so you know, it was widely circulated by all kinds of 

media outlets and perpetuated by some members of this Congress 

that there was an effort going to be made in order to reduce endof-life coverage. They were going to tell some people they could not 

get that coverage. Is that anywhere in the Act, anywhere in the 

regulation, or anywhere in the attempt of the law? 

Mr. ANGOFF. No. I haven’t been able to find it. 

Mr. WEINER. Now, can I ask you this question. Is it also true 

that the way the private insurance model is supposed to work is 

that if you aggregate the cost on a wider population, meaning more 

people get private coverage, that in theory according to free-market 

principles that aggregation of cost means lower costs to the whole 

population? 

Mr. ANGOFF. That is right. That is the fundamental principle of 

insurance. You spread the risk as widely as possible. 

Mr. WEINER. Thank you very much, and I yield back what time 

is remaining. 

Mr. STEARNS. All right. The gentlelady yields back, and we are 

going to conclude. I have, as Chairman I have the opportunity to 

offer a few closing comments. 

I would say a question that, you don’t have to answer but there 

is a competitive effectiveness for it which is part of this bill which 

is trying to determine efficiency of delivery, which is being construed by some as a case of cutting off certain services for, shall 

we say, medical practice. 

But anytime you have a government mandate on insurance companies, you have a government mandate on employers and employVerDate Nov 24 2008 14:18 May 18, 2011 Jkt 037690 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-7 021611\112-7 CHRIS
77 

ees, that is considered a government-run system, and that is why 

in both the State of Virginia and the State of Florida they have 

ruled this mandate unconstitutional. 

But I would just close with this comment. The New York Times 

recently reported on December 8, 2010, that you folks have leased 

an office in Bethesda and are, ‘‘paying almost double the market 

rate for the space.’’ This is what the New York Times reported, and 

I assume that is true. 

Mr. ANGOFF. No, it is not, Mr. Chairman. 

Mr. STEARNS. It is not true. I will give you a chance to correct 

that—— 

Mr. ANGOFF. No, it is not. 

Mr. STEARNS [continuing]. Because you think the New York 

Times is incorrect. 

Mr. ANGOFF. In that case, yes, it is. The Bethesda office space 

was something that we didn’t seek. We rented in Bethesda because 

the rates in Bethesda were lower, substantially lower than they 

were in Washington, DC, and in addition, there was the extra 

added bonus that the space there was already built out. We didn’t 

want to go to Bethesda. We would much rather have preferred to 

be—— 

Mr. STEARNS. In Washington. 

Mr. ANGOFF [continuing]. DC, but it was cheaper, and we could 

get it, get in there faster. 

Mr. STEARNS. OK. So if I went to the landlord of that building 

you are in, they would lease it to me for the same amount that you 

are paying? 

Mr. ANGOFF. I don’t know what they would do. 

Mr. STEARNS. So it is possible that you are paying, even though 

you are paying less than you would be in Washington, DC, you are 

paying more than the market rate for that Bethesda facility. I 

think that is what the New York Times—— 

Mr. ANGOFF. No, and I think—— 

Mr. LARSEN. I think that the error was that there is a difference 

between rentable space and usable space, and you get different 

rates based on whether it is, for example, ready to move in. So the 

market rate for rentable space, which is what my understanding is 

the GSA negotiated, was, in fact, the market rate for rental space. 

Mr. STEARNS. Just giving you an opportunity. I just thought it 

ironic when we are trying to bring health care costs and the main 

core constituency that is deciding what the Health Care Bill should 

be is paying too high a market rate. So that is my only thought 

about it. 

Let me just close by allowing all members to offer questions for 

a period of up to 10 days. If you have additional questions, you are 

welcome to offer those. I want to thank the witnesses for your participation, and without further ado, the Committee is adjourned. 

[Whereupon, at 12:30 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Thank you, Mr. Chairman, for convening our first oversight hearing on the Patient Protection and Affordable Care Act (‘‘PPAC’’). 

78 

This oversight hearing is long overdue. The PPACA was enacted almost 1 year 

ago, and this is the first time this Committee has held an oversight hearing on the 

law. I know some may think we are moving too fast, or asking too many questions 

of the Department of Health and Human Services about the implementation of 

health care reform. But if you ask me, over the last year, this Committee didn’t ask 

enough questions. 

So today we begin our work. We will start by examining the Center for Consumer 

Information and Insurance Oversight. The Center is part of HHS and is responsible 

for implementing the PPACA. The current director of the Center, Mr. Steve Larsen, 

and its former director, Mr. Jay Angoff, are here to testify on behalf of HHS. 

I think it is fair to say that this subcommittee has enough questions about the 

implementation of health care reform that we could keep Mr. Larsen and Mr. Angoff 

here testifying for the rest of the week. Today I am anxious to hear about the waivers the Center has been busy issuing to various health care plans offered by states, 

unions, and other employers. These waivers exempt those plans from the PPACA’s 

requirements, in particular, the requirement that prohibits employers from imposing annual or lifetime limits on benefits. To date, the Center has issued over 900 

waivers to health plans, and that number is rising every day. 

This Committee has requested a number of documents about the waivers issued 

by the Center. We have some documents, but not all. The documents we do have 

show that complying with the PPACA would have forced hundreds of businesses to 

drop the health insurance plans they provide to their workers because the plans 

that Obamacare would have forced them to have would have been too expensive, 

and would have bankrupted those businesses. 

What does it say about the feasibility of a law when you need to exempt over 900 

health plans (so far)—or 2.5 million people—from complying with it? While I think 

it is a good thing that HHS recognized the significant problems posed by the 

PPACA—and exempted these health plans from a requirement that would have resulted in thousands of people losing their health insurance or having reduced benefits—I think it’s a tacit admission that the PPACA is fundamentally flawed. 

I also have questions for Mr. Angoff and Mr. Larsen about the Center’s operations 

and its role, now that it has been moved from the Office of the Secretary of HHS 

to the Centers for Medicare and Medicaid Services (‘‘CMS’’). As the entity responsible for the massive changes being made to the private health care industry, I want 

to know what lessons the Center has learned as we approach the 1-year anniversary 

of the PPACA’s enactment. I hope the witnesses will have some insights to share. 

As Chairman of this Committee, I am committed to investigating the implementation of the PPACA. I think it is important that we uncover the facts about how this 

law is being implemented and what it means for the individuals and employers who 

have to live with its costly requirements. Only when we understand what worked 

and what didn’t can this Congress enact meaningful healthcare reform that lets people keep their coverage and doesn’t pass the bill to future generations. 

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

PREPARED STATEMENT OF HON. JOHN D. DINGELL

Thank you, Mr. Chairman. 

The Department of Health and Human Services was tasked with the tremendous 

responsibility of implementing the Affordable Care Act, with the Center for Consumer Information and Insurance Oversight serving as one of the greatest consumer 

protections under this new law. 

CCIIO has the critical responsibilities of providing consumers with comprehensive 

and accessible information about health plans, monitoring and ensuring compliance 

within the private insurance market, and overseeing the creation of state insurance 

exchanges. The success of CCIIO in these tasks is essential to providing consumers 

with affordable and quality health coverage now and when the health insurance exchanges are up and running. 

In the time since the Affordable Care Act has been implemented, I believe that 

CCIIO used its authority appropriately to assist States, employers and insurers in 

complying with the law, while also ensuring that employers—both small and large— 

are not unnecessarily and negatively impacted by the Affordable Care Act. Their efforts at creating and providing transparency in implementing key provisions of the 

law have resulted in effective and efficient roll-outs of the Early Retiree Reinsurance Program and the Pre-existing Condition Insurance Plan. 

Further, the development of the waiver process for annual limits has struck a 

delicate balance between protecting the access of millions of consumers in ‘‘minimed’’ plans to affordable coverage, while also assisting a diverse array of employers 

79 

and insurers with the information and tools necessary to navigate the application 

process. 

The work CCIIO is doing now in the areas of annual limits, rate review, Early 

Retiree and PCIP all will lay a solid and necessary foundation for the creation of 

the health insurance exchanges, while ensuring uninterrupted care in the meantime. I commend CCIIO for their work done thus far, and I hope that today’s hearing will serve as yet another opportunity for the American people to learn about 

how ACA is improving the quality of their health coverage. 

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Æ 


65977.263