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80–809 2013

PROTECTING AMERICA’S SICK AND CHRONICALLY 

ILL 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

APRIL 3, 2013 

Serial No. 113–24 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

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 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 3 

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

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

California, prepared statement ........................................................................... 6 

WITNESSES

Susan Zurface, on Behalf of the Leukemia and Lymphoma Society ................... 7 

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

Mary Taylor, Lieutenant Governor, State of Ohio ................................................ 21 

Prepared statement .......................................................................................... 23 

Sara R. Collins, Vice President, The Commonwealth Fund ................................. 44 

Prepared statement .......................................................................................... 46 

Ron Pollack, Executive Director, Families USA ................................................... 70 

Prepared statement .......................................................................................... 72 

Thomas P. Miller, Resident Fellow, American Enterprise Institute ................... 76 

Prepared statement .......................................................................................... 78 

(1) 

PROTECTING AMERICA’S SICK AND 

CHRONICALLY ILL 

WEDNESDAY, APRIL 3, 2013 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 1:00 p.m., in room 

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

Members present: Representatives Pitts and Burgess. 

Staff present: Gary Andres, Staff Director; Sean Bonyun, Communications Director; Paul Edattel, Professional Staff Member, 

Health; Julie Goon, Health Policy Advisor; Sydne Harwick, Legislative Clerk; Katie Novaria, Professional Staff Member, Health; John 

O’Shea, Professional Staff Member, Health; Andrew Powaleny, 

Deputy Press Secretary; and Heidi Stirrup, Health Policy Coordinator. 

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

OF PENNSYLVANIA 

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

recognize himself for an opening statement. 

During the last several years, there have been few areas of 

agreement between Republicans and Democrats on how our health 

care system should be reformed to better serve patients. From the 

beginning, however, one area that both sides have designated as a 

top priority is coverage for those with preexisting conditions. In the Republican alternative to Obamacare, we proposed $25 

billion over 10 years to aid Americans suffering from preexisting 

conditions through new universal access programs that reformed 

and expanded state based high-risk pools and reinsurance programs. Obamacare, unfortunately, provided only $5 billion in its Preexisting Condition Insurance Plan, PCIP, we will call it, for this 

purpose until January 1, 2014. At the time of the health care law’s 

passage, Republicans argued that the funding level was too low 

and would not cover all of those it was meant to help. 

The first real signs of trouble for the federally administered highrisk pools came in August 2012, when CMS reduced payments to 

providers treating a high number of high-risk pool enrollees, hitting hospitals especially hard. Additionally, the agency cut the 

number of participating pharmacies that provided certain types of 

2 

drugs to program enrollees. Next, on January 1, 2013, CMS increased the maximum out-of-pocket costs for program enrollees by 

$2,250 and mandated greater use of mail-order pharmacy. Finally, 

on February 15, 2013, CMS announced that it was suspending enrollment in PCIP altogether, due to financial constraints. 

All of these actions were taken despite the fact that enrollment 

in the high-risk plans was less than 30 percent of what had been 

expected. Original estimates were that 375,000 people would sign 

up for the federal high-risk pools. In fact, only approximately 

110,000 individuals have joined. 

CMS is now trying to stretch what is left of the initial $5 billion 

to cover those already enrolled in the program until January 1 of 

next year. What will happen to those people who had pending applications for PCIP when CMS cut off new enrollment? What about 

those, by some estimates 40,000 people, who would have enrolled 

during the remainder of this year? They are left without options 

and without coverage. 

On March 5, Speaker Boehner, Leader Cantor, Whip McCarthy, 

Conference Chair McMorris-Rodgers, Chairman Upton, Dr. Burgess 

and I sent a letter to the President asking that he redirect funding 

from other Obamacare accounts to PCIP to allow the program to 

continue accepting new enrollees. 

Although we still hope for a full repeal of the health care law and 

replace it with other reforms, we have reached out to President 

Obama and asked him to work with us to help those most in need 

get coverage and care. We are still waiting for his response. 

I want to thank all of our witnesses for being here today. I look 

forward to your testimony. I would like to conclude my statement 

at this time. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

During the last several years, there have been few areas of agreement between 

Republicans and Democrats on how our health care system should be reformed to 

better serve patients. 

From the beginning, however, one area that both sides have designated as a top 

priority is coverage for those with pre-existing conditions. 

In the Republican alternative to Obamacare, we proposed $25 billion over 10 

years to aid Americans suffering from pre-existing conditions through new universal 

access programs that reformed and expanded state based high-risk pools and reinsurance programs. 

Obamacare, unfortunately, provided only $5 billion in its Pre-Existing Condition 

Insurance Plan (PCIP) for this purpose until January 1, 2014. 

At the time of the health care law’s passage, Republicans argued that the funding 

level was too low and would not cover all of those it was meant to help. 

The first real signs of trouble for the federally-administered high-risk pools came 

in August 2012, when CMS reduced payments to providers treating a high number 

of high-risk pool enrollees, hitting hospitals especially hard. Additionally, the agency 

cut the number of participating pharmacies that provided certain types of drugs to 

program enrollees. 

Next, on January 1, 2013, CMS increased the maximum out-of-pocket costs for 

program enrollees by $2,250 and mandated greater use of mail order pharmacy. 

Finally, on February 15, 2013, CMS announced that it was suspending enrollment 

in PCIP altogether, due to financial constraints. 

All of these actions were taken despite the fact that enrollment in the high-risk 

plans was less than 30 percent of what had been expected. 

Original estimates were that 375,000 people would sign up for the federal highrisk pools. In fact, only 110,000 individuals have joined. 

3 

CMS is now trying to stretch what is left of the initial $5 billion to cover those 

already enrolled in the program until January 1 of next year. 

What will happen to those people who had pending applications for PCIP when 

CMS cut off new enrollment? 

What about those, by some estimates 40,000 people, who would have enrolled during the remainder of this year? 

They are left without options and without coverage. 

On March 5, Speaker Boehner, Leader Cantor, Whip McCarthy, Conference Chair 

McMorris Rodgers, Chairman Upton, Dr. Burgess, and I sent a letter to the president asking that he redirect funding from other Obamacare accounts to PCIP to 

allow the program to continue accepting new enrollees. 

Although we still hope for a full repeal of the health care law, we have reached 

out to President Obama and asked him to work with us to help those most in need 

get coverage and care. 

We are now waiting for his response. 

# # # 

Mr. PITTS. Since we do not have any of the minority members 

here, I will recognize the vice chairman of the committee, Dr. Burgess, for 5 minutes for his opening statement. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. I thank the chairman for the recognition. I also 

want to thank the witnesses for being with us today. I appreciate 

you making the effort to be here because this is an important issue. 

Some of you I have met before. For others, this is the first time, 

but welcome all. 

We hear a lot that Republicans don’t have alternatives or other 

ideas for the replacement of the President’s health care law. I know 

this is untrue. Many of you on the panel know it is untrue. If anything, our party has a multitude of ideas. But one overreaching aspect of policy that there seems to be general consensus is, we do 

need to address the needs of Americans with what are called preexisting conditions. As the chairman said, the Affordable Care Act 

created the new Preexisting Condition Insurance Plan, affectionately known as PCIP. I think I will refer to that as the federal plan 

so it won’t be confused with State plans. But it was arguably duplicative of actions taken by 35 States prior to 2010 that were operating high-risk pools, and they served an estimated—well, over 

200,000 Americans. It has been shown that State-based programs 

do play an important role in lowering the costs across markets and 

providing coverage options for those who are faced with a preexisting condition. In some States, the federal preexisting program 

was merged with the State’s existing high-risk pool, and in others, 

like my home State of Texas, the PCIP plan operates parallel to 

the State’s pool. However, the federal preexisting plan is providing 

coverage to 100,000 individuals, well short of the 375,000 that CMS 

estimated, but still a significant and compelling group of people 

who all have stories and deserve protection. 

As a physician, insuring those with preexisting conditions and 

assuring that they have access to affordable health insurance is a 

top priority for me. As much as I believed that the President’s Affordable Care Act stretched the bounds of constitutionality, and in 

fact, I still believe that, I was concerned that if the Supreme Court 

felt as I did that day and said look, this thing is outside the bounds 

4 

that the Constitution places on the legislative branch, folks are 

going to have the rug pulled out from under them who had been 

in the federal preexisting program and then could be barred from 

merging into a State’s pool because the federal program had previously provided them coverage. That is why to ensure that that 

did not happen, I was prepared to answer that challenge and introduce the Guaranteed Access to Health Insurance Act of 2012 prior 

to the Court’s decision to provide States with the financial backing 

to decide how best to provide coverage for their populations who 

would be in this risk pool. 

I will also note that unlike many of the complaints that the federal preexisting program has faced, the bill did not require those 

with preexisting conditions to jump through hoops or to remain uninsured for some unreasonable period of time before being eligible 

for coverage. There are always stories of those who have done the 

right thing, insured themselves and then for reasons kind of beyond their control fall out of the system—they lose their job, they 

get a tough medical diagnosis and then find themselves forever frozen out of coverage. Those were the stories that people thought of, 

and people did come to us with that concern. In the summery of 

2009, many of you remember the rather tense town halls that were 

held across the country, and what did people tell us? Yes, they 

were worried about people with preexisting conditions. They didn’t 

want us to mess up what was already working for arguably 65 or 

68 percent of the country, and they sure wanted some help with 

costs, and it turns out, we failed on all three counts with the Affordable Care Act. 

How many people have aged into the 6-month exclusion since the 

Centers for Medicare and Medicaid Services made the announcement that the federal program was now closed. Someone who said 

well, I am going to start the clock in October and I will be able to 

enroll in April now find themselves frozen out of the system. Was 

it because that the federal preexisting program was designed poorly, because its costs were too high? Was it because maybe the problem of serious preexisting conditions existing in a population that 

wanted to purchase insurance was lower than estimated? We will 

never know, but it would have been nice to think these things 

through prior to adopting the Affordable Care Act. 

I will admit that many of the current State-based programs are 

underfunded and lack the ability to meet their needs. It is costly 

to deal with these issues. These people are sick. They have multiple medical conditions. 

I was prepared to authorize $30 billion. Five billion was what the 

federal program allowed. I was prepared to authorize $30 billion. 

I got people back in my district who say, Dr. Burgess, $30 billion, 

that is way too much money, we don’t have the money. Well, I will 

tell you what: it is a lot cheaper than the $2.6 trillion that this 

thing is going to cost, and we wouldn’t have had to blow up the 

whole system in order to take care of those people that arguably 

are going to need help. If we are serious about funding these programs and dealing with these issues, these costs are but a drop in 

the bucket as to what the Affordable Care Act will cost our Nation. 

Mr. Chairman, I see you have already been generous with the 

gavel. I have consumed the time that you yielded back and my time 

5 

as well. I have considerably more, and I will provide that for the 

record, and I am anxious to hear from the witnesses, so I yield 

back. 

[The prepared statement of Mr. Burgess follows:] 

PREPARED STATEMENT OF HON. MICHAEL C. BURGESS

Thank you Mr. Chairman, 

For far too long, Republicans have been accused of not having alternatives to the 

major parts of President’s health care law. 

Although we can all attest that this is simply untrue—if anything our party has 

a multitude of ideas—one overreaching policy we all agree on that requires action 

is addressing the needs of Americans with pre-existing conditions. 

The Affordable Care Act created the new Pre-Existing Condition Insurance Plan 

(PCIP) which was arguably duplicative of actions taken by 35 states prior to 2010 

that were operating high risk pools which served an estimated 207,000 Americans. 

It has been shown that state-based programs play an important role in lowering 

costs across markets and in providing coverage options for those with preexisting 

conditions. 

In some states PCIP was merged with a state’s existing high risk pool and in others, like Texas the PCIP plan operates parallel to the state’s pool. 

However, PCIP is providing coverage to over 100,000 individuals—well short ofthe 

375,000 CMS estimated—but still a significant group of people who need protection. 

As a physician, ensuring those with pre-existing conditions have access to affordable health insurance is a top priority for me. 

As much as I believed that the ACA stretched the bounds of Constitutionality and 

still do, I was concerned that had the Supreme Court invalidated the law that those 

in PCIP would have the rug pulled from beneath them and could be barred from 

merging into a state’s pool because PCIP had previously provided them coverage. 

That is why—to ensure that did not happen I was prepared to answer that challenge had it arisen by introducing The Guaranteed Access to Health Insurance Act 

of 2012 prior to the Court’s decision to provide states the financial backing to decide 

how best to provide coverage for this population through a high risk pool, reinsurance program or other innovative method. 

I will also note—unlike many of the complaints that PCIP has faced—this bill did 

not require those with pre-existing conditions to jump through hoops or remain uninsured for 6 months before being eligible for coverage. 

There are always stories of those who have done the right thing and insured 

themselves, who then fall out of the system—usually because of a job loss—get a 

medical diagnosis and even when their employment status changes can find themselves forever locked out of coverage. 

Those were the stories that people thought of when they did say they wanted 

something done about this issue—they also said they wanted us to address cost and 

not screw up the rest of the system for everyone else. 

We obviously failed in both those respects when it comes to the ACA and as of 

February 15th of this year when CMS announced it would suspend enrollment in 

PCIP—the Administration has failed in implementing an area that conceptually was 

bipartisan. 

How many people have aged into the 6 month exclusion since 

CMS’sannouncement? How many were awaiting coverage but now are told—especially in states where PCIP is the only option—you’ll just have to wait until 2014? 

And why was enrollment so low? Was it because of PCIP’s design or because the 

costs were still too high, or was it because maybe the problem of serious pre-existing 

conditions existing in a population that wanted to purchase insurance was lower 

than estimated? We will never know, but it would have been nice to think these 

issues out prior to adopting the ACA. 

I will freely admit that many of the current state based programs are underfunded and lacking the ability to meet their needs. It is costly to deal with this 

issue—I was prepared to authorize $30 billion—House Republicans supported $25 

billion in our substitute to the ACA. We are serious about funding these programs 

and dealing with this issue. And those costs are a drop in the bucket to what the 

ACA will cost our nation. 

But these efforts recognized that for those who do need insurance and are truly 

uninsurable in the market—it will be costly and yet while PCIP’s spending has consistently exceeded expectations the ultimate solution was not to prepare for needing 

more money, or transfer funds from other parts of ACA implementation or even to 

approach Congress for funding—it was to tell people tough luck. 

6 

I cannot underestimate how important that approach by CMS and the Administration is to this conversation. If that is the attitude, what happens if ACA costs 

exceed what is expected? What about Medicaid expansion? Is there really a question 

as to why states are nervous about seeing exchange subsidies reduced or the Medicaid FMAP paired down for new populations? 

The Administration says that will never happen but yet they are perfectly willing 

to turn away sick people—not healthy childless adults—currently not categorically 

eligible for other programs. I think that point is worth hovering on for a moment. 

The Administration is saying this is all the coverage we can afford so no more is 

available? 

So again I ask—what happens if subsidies get too expensive? What about Medicaid? Already many in Medicaid cannot get care because he programs reimbursements drive providers from the program. What about Medicare—we actually know 

the answer there too—IPAB. Seems like this could be a trend in approaching these 

tough issues. 

And there are some who will still say that concerns about rationing are not based 

in fact? They will look at us and with a straight face and say, coverage without access, isn’t something we have to be worried about? 

Really? Because I think every single person who is left in the void between PCIP’s 

enrollment suspension and 2014 is a testament to these being VERY real concerns 

that are worth asking of the Administration and seeing how far they are willing to 

take an ideology that prioritizes coverage over lowering costs or ensuring access to 

care. 

Thank you. 

Mr. PITTS. The Chair thanks the gentleman, and we do have 

statements from the ranking members, Pallone and Waxman, and 

I will ask unanimous consent to enter those into the record. Without objection, so ordered. 

[The information follows:] 

PREPARED STATEMENT OF HON. HENRY A. WAXMAN

Today’s hearing is focused on a critically important topic: protecting America’s 

sick and chronically ill. This is a concern that has driven much of my work on this 

Committee for more than three decades. It has driven my work to make prescription 

drugs safer and more affordable, it has driven my work to expand access to Medicaid, and it was a driving force behind the passage of the Affordable Care Act in 

2010. 

The Affordable Care Act does more to protect America’s sick and chronically ill 

than any piece of legislation in the last 50 years. It bans insurance company discrimination on the basis of pre-existing conditions—protecting tens of millions of 

sick and chronically ill Americans from being priced out of or excluded outright from 

the health insurance market. It has already made preventive care available to over 

100 million Americans with no cost sharing—helping prevent people from getting 

sick or becoming chronically ill in the first place. It makes critical investments in 

our health care workforce and community based prevention that will allow millions 

of Americans to lead healthier lives. And it makes comprehensive reforms to the 

health insurance market that will reduce the number of uninsured by 30 million 

people and lower costs by offering generous premium subsidies and promoting competition among insurance companies. 

Starting in 2014 the Affordable Care Act bans insurance companies from discriminating on the basis of health status or a pre-existing condition. This is a straightforward, fair solution to an insurance company practice that has hurt millions of 

Americans for years. As temporary bridge program to full implementation of these 

reforms, the Affordable Care Act created a high risk pool called the Pre-existing 

Condition Insurance Program (PCIP). 

The program was always designed to be a temporary solution to help some of the 

sickest Americans who had been locked out of the insurance market get coverage. 

It was given a fixed appropriation of $5 billion and was set up to offer an affordable 

option of comprehensive coverage to a population with high health needs. It was 

also set up to be more accessible than the many state high risk pools that charge 

high premiums, have long waiting lists, or are closed to new enrollees—as Florida’s 

has been for more than twenty years. 

Republicans have done a complicated dance in their position on the PCIP program. They proposed spending $25 billion on high risk pools as part of a plan to 

7 

‘‘replace’’ the Affordable Care Act. But despite proposing five times as much spending on high risk pools, they criticize PCIP for being too expensive. They attack PCIP 

for getting up and running too quickly. But then they criticize it for not enrolling 

people fast enough. They embrace high risk pools as a way to make quality coverage 

available to people with pre-existing conditions. But they ignore the fact that state 

high risk pools have been underfunded, oversubscribed, and unaffordable for years. 

And most egregiously, they claim that they want to protect America’s sick and 

chronically ill while working tirelessly to undermine the Affordable Care Act’s ban 

on pre-existing condition discrimination, its critical investments in prevention, and 

its landmark expansion of coverage. 

PCIP has been able to help 135,000 of the sickest Americans get treatment for 

costly and life threatening conditions like cancer and heart disease. CMS was prudent with the $5 billion Congress appropriated for this program and suspended new 

enrollment last month. This is not ideal but it is not entirely unexpected. The agency was working with an imperfect, temporary policy solution to an intractable problem. I am pleased that the agency has guaranteed that current enrollees will not 

lose their coverage, which is far more than the private insurance industry would 

have done for these patients. 

The shortcomings of the PCIP program are a sign of just how dysfunctional the 

health insurance market was prior to reform and how urgently we need the comprehensive reforms in the ACA. Expanding access to coverage and efficiently spread 

risk across the market is a far better solution to the problem of rampant un-insurance and pre-existing condition exclusions than locking sick Americans into increasingly expensive coverage through high-risk pools. 

In a few short months applicants who were not able to enroll in PCIP will have 

access to quality affordable coverage because of the Affordable Care Act. If my Republican friends truly share the goal of caring for sick and chronically ill Americans 

they will work with us to ensure a smooth transition to 2014 rather than attacking 

PCIP for demonstrating how much we need comprehensive reform. 

Mr. PITTS. We have one panel today, and I will introduce them 

at this time, and I would like to thank them for taking time to 

come and share their expertise with us today. First is Ms. Susan 

Zurface on behalf of the Leukemia and Lymphoma Society. Secondly, the Hon. Mary Taylor, Lieutenant Governor from the State 

of Ohio and Director of the Ohio Department of Insurance. Thirdly, 

Dr. Sara Collins, Vice President of the Commonwealth Fund. 

Fourthly, Mr. Ron Pollack, Executive Director of Families USA. 

And finally, Mr. Thomas Miller, Resident Fellow of the American 

Enterprise Institute. Thank you all for coming. 

Your written testimony will be made part of the record. We ask 

that you summarize your testimony and opening statement of 5 

minutes each, and Ms. Zurface, we will start with you. You are recognized for 5 minutes for your opening statement. 

STATEMENTS OF SUSAN ZURFACE, ON BEHALF OF THE LEUKEMIA AND LYMPHOMA SOCIETY; HON. MARY TAYLOR, 

LIEUTENANT GOVERNOR, STATE OF OHIO; DR. SARA R. COLLINS, VICE PRESIDENT, THE COMMONWEALTH FUND; RON 

POLLACK, EXECUTIVE DIRECTOR, FAMILIES USA; AND 

THOMAS P. MILLER, RESIDENT FELLOW, AMERICAN ENTERPRISE INSTITUTE 

STATEMENT OF SUSAN ZURFACE 

Ms. ZURFACE. Thank you. Mr. Chairman and members of the 

Health Subcommittee, as a patient with blood cancer, it is my 

honor to share my experience and those of other blood-cancer patients as they have attempted to utilize the Preexisting Condition 

Insurance Program. 

8 

I am a 42-year-old single mother with a full-time legal career. I 

live in rural southern Ohio in an area that has been clearly affected by the economic recession. I am a solo practitioner with a 

modest law practice, a sizable portion of which is dedicated to serving indigent clients. 

I have two children, who thankfully have health coverage under 

their father’s medical plan. I am active and I strive to keep myself 

healthy. For the last 13 years, I have rarely been ill and I have 

not needed health insurance coverage. 

After my mother’s death in September of 2012, I became ill, and 

after nearly 8 weeks, I ultimately saw my family physician and a 

series of tests were ordered. A week and a half later, on January 

9, I received the first test results confirming a diagnosis of chronic 

lymphocytic leukemia, CLL, one of the most common types of 

adulthood leukemias. The bill for that analysis alone was $7,600. 

After follow-up tests and a three-day stay in the MICU at Wexner 

Ohio State University Medical Center, I received over $50,000 of 

medical bills that I could not afford. Thankfully, the social workers 

at the hospital immediately enrolled me in Ohio’s Hospital Care 

Assurance Program, HCAP. Because my income met the threshold 

for eligibility, I currently have 100 percent medical coverage. Eligibility for HCAP is reviewed quarterly. I have been working full 

time since the beginning of February, so I will likely lose eligibility 

for this program. 

In late February, I learned about the Ohio High Risk Pool program. Just before sending in my application, I learned that the program was no longer accepting new patients due to lack of funding. 

My options are limited. I cannot qualify for Medicaid unless my income is low or I become disabled by my CLL, and I cannot afford 

a high-premium or high-deductible plan. If I am working at a normal capacity, I will almost always exceed the level to maintain continuous assistance through HCAP but not by enough that makes 

health care affordable. Even without costly treatment, my CLL requires regular medical care, blood screenings, and screenings for 

secondary cancers. Without the benefit of coverage, I have three options: do nothing at high financial and health risk, declare medical 

bankruptcy or enroll in clinical trials out of financial, not medical, 

necessity. 

The Leukemia and Lymphoma Society has identified three barriers that exist in this program. First, the 6-month wait without 

health insurance that a patient must endure before becoming eligible to enroll; second, premiums that are prohibitively high; and 

third, the lack of portability across networks. 

I have submitted a representative sample of stories from patients 

who have been working with LLS as part of my written testimony. 

When seriously ill patients are forced to go uninsured for 6 

months, they risk deeper illness or death, bankruptcy, and/or the 

potential loss of their homes. This barrier cannot be changed 

through the regulatory process. We urge Members of Congress to 

work together to remove this barrier legislatively. 

A second significant barrier is the relatively high cost of coverage. Nearly 80 percent of the uninsured with high-cost chronic 

conditions are individuals with incomes less than 400 percent of 

the federal poverty level who will likely find PCIP premiums 

9 

unaffordable. Future enrollees in the exchanges will be provided 

subsidized premiums and out-of-pocket spending caps. However, 

that is not the case with PCIP enrollees. Furthermore, a small subset of States including Pennsylvania and several others have exacerbated the problem by prohibiting third parties from assisting patients by covering the cost of PCIP premiums. We urge Members 

of Congress to enact commonsense reforms to the PCIP program including providing premium support for those patients who may 

need assistance and by allowing patients to receive third-party 

non-government assistance. 

One final barrier that patients experience in PCIP is a lack of 

portability across networks. For many patients, once they have 

begun their care within a network, it is emotionally difficult and 

cost-prohibitive to reestablish relationships with new providers. 

The PCIP allows patients to visit providers outside of a participating network. However, the out-of-pocket deductibles are double 

those within the network. There is no out-of-pocket cap, and a 50 

percent coinsurance is added to any services obtained. We urge 

Members of Congress to provide patients with the flexibility needed 

to obtain the health care they require. 

On behalf of the Leukemia and Lymphoma Society, myself and 

the over 1 million patients living with or in remission from blood 

cancer, thank you for the opportunity to speak with you today. We 

urge Congress and the Administration to work together to ensure 

continuity in the program as well as policy fixes that could make 

it even more helpful for patients who so desperately need it. 

[The prepared statement of Ms. Zurface follows:] 

10 


80809.001

www.LLS.org 

Testimony of Ms. Susan Zurface, Esq. 

on behalf of The Leukemia & Lymphoma Society 

before the House Committee on Energy and Commerce Subcommittee on Health 

in connection with its hearing on 

"Protecting America's Sick and Chronically III" 

April 3, 2013 

Mr. Chairman and Members ofthe health subcommittee, 

I appreciate the opportunity to testify before you today in connection with your hearing concerning 

the Pre-Existing Condition Insurance Program (PCIP). As a patient with blood cancer, it is my honor to 

share my experience, and those of other blood cancer patients as they have attempted to utilize this crucial 

program that was enacted as part of the Patient Protection and Affordable Care Act (PPACA). As you well 

know, cancer is non-partisan. It affects patients of all socioeconomic classes; political parties; ages; and 

ethnicities. As such, I appreciate the bi-partisan effort in Congress to address the needs of all vulnerable 

patient populations, including those of us affected by cancer. 

My story 

I am a 42 year old single mother with a full time legal career. ! live in rural southern Ohio in an area 

that has been clearly affected by the economic recession. I am a solo practitioner with a modest law 

practice handling criminal, mediation, appellate, and guardian ad litem cases. A sizable portion of my 

practice is dedicated to serving as court-appointed counsel for indigent clients and I handle a significant 

number of cases on a pro bono basis. I have two children, who thankfully have health coverage under their 

father's medical plan. I am a cyclist and a triathlete. I am active and I strive to keep myself healthy. For the 

last thirteen years, I have rarely been ill and, when I have been sick, I have self-diagnosed and treated my 

Office of Public Policy 

10 G Street NE, Suite 501, Washington, DC 20002 ! lel.202.408.7631 ! fax. 202.408.7638 
11 


80809.002

illness with natural, cost-effective measures. In essence, I have not needed health insurance coverage, 

although the lack of health insurance coverage deterred me from seeking preventative health care, such as 

routine pap tests and blood work. 

Last November, I was finally confronted with a stomach virus that would not respond to my typical 

methods of treatment. After my mother's death in September, I became ill, experiencing a series of minor 

illnesses that made me believe my immune system was compromised as a result of the stress of nursing my 

mother through her short terminal illness. I did not seek medical care until after I had been sick for_nearly 

eight weeks. I made two trips to the local urgent care before scheduling an appointment with my own 

family physician. The accessibility and low cost ofthe urgent care is much more appealing than the 

hundreds of dollars necessary to cover one doctor's appointment with blood work. Ultimately, I did see my 

family physician and a series of tests were ordered. Within hours, my doctor relayed his first concerns that 

something was not right. 

A week and a halflater, on January 9th, I received the first test results confirming a diagnosis of 

Chronic Lymphocytic Leukemia (CLL), one of the most common types of adulthood leukemias. The bill 

for that analysis alone was $7,600. The following week, I was scheduled for a CT scan. The cost of that 

examination was approximately $6,000. As a result of the CT scan, I had a severe allergic reaction that 

landed me first in my local emergency room and then in the MICU at Wexner OSU Medical Center in 

Columbus, Ohio. My less-than-three day stay at OSU resulted in a bill for hospital services only of about 

$46,000. The physician services for numerous departments were billed separately. 

While CLL is generally known as an indolent cancer that affects people over 60 years old, my 

specific type of this disease is marked by a chromosomal deletion that makes it more aggressive and also 

makes it chemotherapy resistant. The testing involved to come to that conclusion is extremely expensive. 
12 


80809.003

It is unlikely that I will have the luxury of going more than a few years without having to take treatment. 

Standard chemotherapy treatments will not be available to me because my cancer will not likely respond 

favorably. 

Thankfully, during my stay at Wexner's OSU Medical Center, the social workers at the hospital 

immediately enrolled me in Ohio's Hospital Care Assurance Program (HCAP), a federally funded program 

administered through hospitals that provide a disproportionate share of uncompensated services to the 

indigent and uninsured. At the time of my hospitalization, I had been working at less than half-time 

capacity for nearly six months. Because my income met the threshold for eligibility for this program, I 

currently have 100% medical coverage. 

Eligibility for the HCAP program is reviewed quarterly. I have been back to work at full capacity 

since the beginning of February. My next quarterly review will show a very different financial picture and 

I will likely soon lose eligibility for this program. 

In anticipation of my increase in income, I researched available medical insurance options. Without 

my newly diagnosed illness, I was unable to find any health insurance coverage that would cost less than 

$350/month with a $10,000 deductible. It was during that research that I came across, in late February, the 

Ohio High Risk Pool program, offering medical coverage for $250/month with a $2,500 deductible for 

people with pre-existing conditions. I contacted the insurance company directly and spoke about the 

coverage. I printed off the application and sent it to my local oncologist for certification. I received it back 

and was prepared to mail it in, when I learned that the program was no longer accepting new patients due to 

lack of funding. 

My options are limited. I cannot qualifY for Medicaid unless I am disabled. I am not yet sick 

enough to be disabled. My children have health insurance coverage, so Medicaid is not available to me as a 
13 


80809.004

parent. Being self-employed, my income is so sporadic that I cannot regularly afford a high premium or a 

high deductible and I can no longer qualify for private health insurance. If I am working at a normal 

capacity, I will almost always exceed the income level to maintain continuous assistance through HCAP, 

but not by enough that makes health care affordable. Even without costly treatment, the cost of managing a 

chemo-resistant, aggressive leukemia that renders my immune system compromised to even the most 

common illnesses requires regular medical care, blood screenings, and screenings for secondary cancers. I 

presently have blood work completed approximately every four weeks and I see a local oncologist for 

monitoring and a specialist who will make the decision as to when treatment is necessary. Those costs 

alone are unmanageable without health insurance coverage or financial assistance. Without the benefit of 

coverage, I will be willfully incurring expenses that I know I have no means to pay, in which case, r will 

later have to consider bankruptcy to discharge whatever medical expenses I have incurred from providers 

who treat me in good faith, but whom I cannot pay for their services. 

The alternative is that I choose not to seek medical attention as a preventative measure and that I 

choose not to seek medical attention when r am ill, risking death from something as ordinary but potentially 

fatal as influenza, bacterial infection, or pneumonia. Another alternative, and a very likely one at this time, 

is that I will be forced to enter into clinical trials for treatment out of fear that I will be unable to bear the 

costs of treatment alternatives when they become medically necessary. As you can see, I am basically 

healthy at this time. My blood work continues to show indolent growth. I am not being affected by any 

viruses, bacteria, staph, or other disastrous infections. Clinical trials are wonderful options and I am 

pleased that, at the very least, there is a trial for which my CLL qualifies. However, I am in a position 

where my choice to put something potentially toxic into my body may be made for purely financial 

reasons, as opposed to seeking that course because I am so ill that the drug being offered may be my only 
14 


80809.005

hope. Furthermore, once that same drug is approved, the cost will likely be so cost-prohibitive that the very 

same thing that I qualitY for right now may not be available to me when I need it. 

I hope that Congress and the Administration can continue to work together to re-instate PCIP, and 

when doing so, improve areas that serve as barriers for eligible patients who wish to enroll. 

Policy Recommendations 

There is no argument that this program, even it its less-than-perfect form, was an essential part of 

the ACA, meant to carry patients with pre-existing conditions through until the roll-out of the exchanges on 

January I, 2014. Data from the Center for Consumer Information and Insurance Oversight (CCIO) 

demonstrated that on average the program experienced claims costs that were 2.5 times what was 

anticipated, suggesting the acute, costly medical needs of the population that program serves. In fact, nearly 

78% of the total cost of the program covered four serious medical needs: cancer, diseases of the circulatory 

system, rehabilitative care and after care, including certain forms of radiation and chemotherapy; and 

degenerative joint diseases.! 

There are three major barriers that exist in this program - the six month wait without health 

insurance that a patient must endure before becoming eligible to enroll; premiums that are so high that they 

can be unaffordable for some patients; and the lack of portability across networks. 

Six month wait without heulth insurance 

One of the largest barriers to patients accessing the PCIP, and one that Congress has full authority 

to change, is a requirement that patients must be insured for six months before they are eligible to enroll in 

I ''Covering People with Pre~Existing Conditions: Report on the Implementation and Operation of the Pre-Existing Condition 

Insurance Plan Program," last modified February 23 2012, http://www.cciio.cms.gov/resources/fileslFiles2l02242012/pcipannual-report.pdf. 
15 


80809.006

the program.2 For cancer patients, and for other patient populations who are seriously ill, living for six 

months without health insurance coverage can be a death sentence. 

The Leukemia & Lymphoma Society has been contacted by, and has been assisting, nUmerous 

patients who have encountered this barrier. Below are representative samples of patients that have 

contacted LLS: 

I. A twenty six year old patient in Boca Raton, FL was diagnosed with Hodgkin's Lymphoma three 

years ago while he was still covered by his parent's insurance policy. Now that he is 26, he has aged 

out of coverage and is showing signs of relapse. In order to get coverage in the private market, he 

would have to pay extremely high insurance premiums due to his pre-existing condition. He is in 

need of medical care and cannot wait six months to get health insurance. Enrolling in the PCIP 

program now would assist him and his family greatly. 

2. A fifty eight year old female patient was diagnosed with follicular lymphoma in 2006. Her 

physician prescribed a 'watch and wait' approach. Her employer switched from a comprehensive 

insurance plan to a high deductible plan with no coverage for cancer care, including no coverage for 

standard medical screenings, and no coverage for chemotherapy. Prior to March 2, she applied for 

coverage under the PCIP and was rejected because she had been covered under an insurance policy 

within six months prior to the application date - even though the insurance policy did not cover 

cancer care. Her care has since depleted all of her family's assets. LLS is providing her with co-pay 

assistance and attempting to connect her with additional sources that can help her access the care 

that she needs. 

2 Arthur Delaney, "peIP: 98 Percent Of Federa! Funds To Help Uninsured Go Unspent," last modified August 29 2011, 

http://v.vvw,huffingtonposLcom/2011/08/29!pcip-pre-existing-conditions-uninsuredn940292.html?wpisrc=nJ wonk. 
16 


80809.007

3. A fifty two year old female multiple myeloma patient from Anderson, SC, who is a recipient of 

Social Security Supplemental Income (SSI) benefits, was covered through COBRA after she was let 

go from her prior job. No private policy would provide health insurance coverage for her. The local 

LLS chapter referred her to the PCIP program, and the patient was rejected because she had been 

receiving health coverage under her COBRA plan within the last six months. 

4. A fifty eight year old patient in West Palm Beach, FL was diagnosed with Acute Myeloid Leukemia 

in March of2012. Her income exceeded Medicaid eligibility in November 2012, and disqualified 

her for the program. She is ineligible to apply for PCIP for six months, but needs insurance now to 

cover the cost of her medical care. 

As you know, the origins ofthis requirement do not stem from this chamber. The House version of 

the ACA did not include this requirement, but rather required insurance plans who 'dump' seriously ill 

patients to re-pay the federal pool. Senate Finance staff indicated that this restriction is meant to prohibit 

insurance companies from 'dumping' high-cost patients over to government-funded pools. However, this 

restriction is not a disincentive to insurance ccmpanies, and merely harms an already vulnerable patient 

population. 3 The unintended consequences of this policy are far more harmful to patients and the economy 

as a whole. When seriously ill patients are forced to go uninsured for six months, they risk deeper illness or 

death, bankruptcy, and/or potential loss of their homes. 

This barrier cannot be changed through the regulatory process. We urge Members of Congress to 

work together to remove this barrier legislatively. 

3 "Democrats' Plan to Help 'Uninsurables' Requires 6 month wait;' last modified November 52009, 

http://v.'Ww.foxnews,com/poljtjcs!2009/11/05/democrats~plan-help-uninsurables-guestionedl 
17 


80809.008

Cost/premium assistance 

A significant barrier to enrollment for all ofthe PCIP programs, both federal and state-administered, 

is the relatively high cost of coverage. Though PCIP regulations cap premiums at the local standard market 

rate, nearly eighty percent of the uninsured with high-cost chronic conditions are individuals with incomes 

less than 400 percent of the federal poverty level ($43,560 for an individual),who may find those rates 

unaffordable.4 Future enrollees in the exchanges will be provided subsidized premiums and out-of-pocket 

spending; however, that is not the case with PCIP enrollees. In the interim, patients in California enrolled in 

PCIP pay an average of $565 per month. Across the country, depending on the individual, the current 

monthly premiums can be as low as $127 or as high as $652 per month, reduced from the original high of 

$1,003. 5 

While the benefits ofa state's high-risk pool may vary significantly, with some having significantly 

more generous or significantly more limited benefits than the PCIP, the point remains that when premiums 

and cost-sharing requirements are added together, the plans can be unaffordable for the patient population it 

intends to serve.6 

By way of example: 

I. A sixty one year old female Non-Hodgkins Lymphoma patient diagnosed in 1998 from Brookfield, 

Wisconsin was denied health insurance coverage last July to due her pre-existing condition. She 

4 Mark Merlis, "Health Coverage for the High-Risk Uninsured: Policy Options for Design of the Temporary High-Risk Pool," 

National Institute for Health Care Reform 2 (May 2010). 

5 Viji Sundaram, "Health Reform Proving a Lifeline for the Uninsurable,"last modified January 182013, 

http://newarnericamcdia.org/20 1310 1 lhealth-reform-proving-a-li feline-for-the-uninsurable.php. 

6 Diana Mayes, ct ai, '"Chapter Four: First Hurdle, Pre-Existing Insurance Plans," in State a/the States (Robert Wood Johnson 

Foundation 2011), 4.1-4.7, last modified February 2011, http://www.statecoverage.orgifilesJu34/S0S%20chapter''/,204.pdf. 
18 


80809.009

attempted to enroll in the PCIP in July 2012 and was accepted, but ultimately opted not to 

participate as the cost was prohibitively high and did not cover all of the expenses she needed it to 

cover. She then attempted to seek coverage under her husband's health insurance policy but was 

denied. 

Furthermore, a small subset of states, including Pennsylvania, Arkansas, Connecticut, Iowa, Maine, 

Montana, and Rhode Island, have exacerbated the problem by prohibiting third parties from assisting 

patients by covering the cost of PCIP premiums.7 

We urge Members of Congress to enact common-sense reforms to the PCIP program, including 

providing premium support for those patients who may need assistance, and by allowing patients to receive 

third-party non-government assistance. 

Portability across networks 

One final barrier that patients experience in PCIP is a lack of portability across networks. For many 

patients, once they have begun their care within a network, it is emotionally difficult and costly to reestablish relationships with new providers. 

The PCIP allows patients to visit patients outside of a participating network, however the out-ofpocket deductibles are double those within network, there is no out-of-pocket cap, and a 50% co-insurance 

is added to any services obtained. 8 

7 Michelle Andrews, "Some States Limit How Uninsured Pay for High-Risk Insurance," last modified March 192012, 

http://www .kaiserhealthncv .. 's.orgiF eatures,lInsuring-Y our-Health!20 12!High-R isk -Pools-Michelle-Andrews-03 20 12.aspx?p-l 

8 California's PCIP plan charged had an annual out-of-pocket maximum of$2,500 for in-network subscribers, and no maximum 

for out-of-network. In addition, the plan charges 50% co-insurance for services provided out-of-network. "PCIP Services: What 

Services are Covered in PCIPT last accessed March 31 2013, http://www.pcip.ca.gov/services/. 
19 


80809.010

By way of example: 

1. Forty nine year old patient from Elyria, Ohio was diagnosed with CML and uninsured at the time of 

his diagnosis. His wife is a retired schoolteacher on a fixed income. He was diagnosed at a local 

hospital with CML in an acute phase and was immediately referred to the University Hospital 

transplant team for a stem cell transplant. The family worked with the social worker and financial 

counselors at the hospital to apply for the high-risk insurance pool; however, because the hospital 

he had been receiving care at was out of network for the one carrier that covered patients under 

PCIP, they would need to apply for a waiver. Transferring to an in-network hospital would have 

required the patient to repeat many ofthe tests he had already taken, and to establish new 

relationships with providers. The waiver was ultimately denied, and the family has amassed 

thousands of dollars in medical bills. The couple is now in divorce proceedings, and the patient will 

be eligible to apply for Medicaid once the divorce is final. The family has no way to pay for the 

medical bills and have cashed out the patient's life insurance policy to pay the hospital. 

We urge Members of Congress to provide patients with the flexibility needed to obtain the healthcare they 

require. 

Conclusion 

Allow me to share one final story. It is of a patient from Abilene, TX, recently diagnosed with 

multiple myeloma. This patient is forty two years old and uninsured. At the time of his diagnosis, his 

physician indicated that a stem cell transplant was needed to treat the patient's blood cancer, but the 

procedure is expensive and requires health insurance coverage. He had been treated by the hospital through 

their indigent care program, however he has exhausted his benefits through that program until 2014. The 

patient applied to the PCIP and was denied as Texas had suspended new enrollees by late February. With 
20 


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no alternate options available, the patient is currently awaiting screening by the NIH for two clinical trials. 

Although the outcome is looking positive at this time, there is still no guarantee that patient will get the 

transplant that his physician feels is medically necessary. He now must meet the eligibility for the trial. 

This patient must travel a great distance for care, and it is unclear iffamily will be able to accompany him 

on this journey. There are many barriers, anyone of which could have been enough of an obstacle to 

prevent this patient from receiving necessary care, If the PCIP could be extended in a modified form, he 

would certainly qualify, and could receive care closer to home, with his family present. 

On behalf ofthe Leukemia & Lymphoma Society, myself, and the over one million patients living 

with or in remission from blood cancer, thank you for the opportunity to speak with you today. We urge 

Congress and the Administration to work together to ensure continuity in the program, as well as policy 

fixes that could make it even more helpful for the patients who so desperately need it. 
21 

Mr. PITTS. The Chair thanks the gentlelady, and especially thank 

you for sharing your personal experience and for these recommendations. 

The Chair recognizes Lieutenant Governor Taylor for 5 minutes 

for an opening statement. 

STATEMENT OF HON. MARY TAYLOR 

Ms. TAYLOR. Mr. Chairman and distinguished members of the 

committee, thank you for the opportunity to testify this afternoon 

regarding Ohio’s experience with the High Risk Pool program 

under the Affordable Care Act. My name is Mary Taylor, and I am 

Ohio’s Lieutenant Governor and also the Director of the Department of Insurance. 

States have regulated insurance for decades based on the specific 

needs of their populations, economies and insurance markets. 

Under the leadership of different Administrations, Democrat and 

Republican, over the past 60 years, our department has managed 

and regulated a competitive insurance market for consumers and 

job creators. Because of our regulatory environment, Ohio has a 

very competitive health insurance market with 60 companies writing health insurance business from which Ohio’s consumers can 

choose. 

In order to determine the impact of the ACA on Ohio’s vibrant 

market, my department commissioned a report conducted by 

Milliman Inc. in 2011. This report projected premiums would increase in the individual market in Ohio between 55 and 85 percent. 

In addition, the report projected a substantial shift in how people 

get their coverage, and as a result, the size of the individual market in Ohio is projected to more than double with the employersponsored insurance market decreasing. 

In addition to these impacts, the ACA does little in the way of 

reducing the underlying cost of care that has historically driven the 

increasing cost of health insurance coverage. This law is a one-sizefits-all national approach to health care that removes the flexibility 

from States and is laden with very narrow and rigid regulations. 

More specifically to the High Risk Pool. The High Risk Pool concept can be a useful tool to address access to health insurance coverage if done well. However, implementing them as mandated in 

the ACA is problematic. The federal government’s poor management and oversight of the program led to its unsustainability and 

ultimately the untimely decision to close enrollment in the program 

for new participants, leaving a very vulnerable population without 

access to insurance coverage. 

Ohio’s High Risk Pool was organized in 2010 and is administered 

by an Ohio-licensed private health insurer but it is funded by HHS. 

Our department retained its general regulatory authority over the 

High Risk Pool, including the right to review premium rates and 

resolve consumer appeals. Even though the program administered 

by Ohio was among the most efficient and cost-effective in the 

country, the federal management of the High Risk Pool program 

quickly caused disagreements between the two agencies. 

In 2011, the High Risk Pool submitted rates to both HHS and 

the Ohio Department of Insurance for review and approval. The 

Department of Insurance approved the rates that were actuarially 

22 

justified for the two High Risk Pool plans using our normal processes. However, HHS refused to approve the rates and directed the 

Ohio High Risk Pool Administrator to artificially reduce rates for 

those in the lower-deductible plan and artificially increase rates for 

those in the higher-deductible plan. As regulators, we must ensure 

that each block of business is solvent and that one pool of individuals isn’t subsidizing the cost of another pool of individuals. As a 

CPA and insurance regulator where a primary concern relates to 

company solvency, forcing a company to artificially set rates causes 

serious solvency concerns and potentially puts the company at risk 

where it can’t pay the health claims incurred by those individuals 

and families who have insurance coverage under the plan. Eventually HHS and the Department were able to come to an agreement 

on rates, but of course, this caused consumer confusion and pushed 

back renewal dates. 

Shortly after the problems with the rates were resolved, we 

began having eligibility disputes with HHS. As the primary regulator, the department reserved the right to make final determinations on eligibility, but in these cases, HHS demanded the Ohio 

High Risk Pool Administrator ignore the department’s determination and instead follow HHS’s directions. Ohioans who were clearly 

eligible for the High Risk Pool according to our department’s review were forced out of the program by HHS, causing them to lose 

their only available source of coverage. 

After protracted discussions between the department, the Ohio 

Administrator and HHS, it became clear that HHS would not recognize the department’s authority. The Ohio Administrator was 

then forced to file a lawsuit against both parties seeking clarification from the courts as to which party they were bound to follow. 

An agreement was eventually reached in which the department’s 

regulatory authority was upheld but this several-month-long ordeal 

demonstrated the federal government’s propensity to overreach and 

disregard State regulation of insurance that resulted in harm to 

consumers in the process. 

While our pool has come with challenges, to say the least, we feel 

this tool is not without merit. However, as you seek additional 

funding to allow this program to continue through 2013, we encourage you to ensure States are given control and flexibility. Just as 

with the High Risk Pool in Ohio, when a federal agency steps into 

a role in which they do not have the experience or expertise to 

properly understand the issue, it can have severe consequences for 

the market and consumers. Knowing the challenges that lie ahead, 

I encourage Members of Congress to continue working toward a 

better solution. We will continue our work to improve quality of 

care in Ohio, reduce costs, and truly inform Ohio’s health care system. 

Thank you for allowing me the opportunity to testify before you 

today, and I would be happy to answer questions that you have at 

the chairman’s request. 

[The prepared statement of Ms. Taylor follows:] 

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80809.012

The Committee on Energy and Commerce, Subcommittee on Health 

Summary of Statement of Mary Taylor, 

Ohio Lt. Governor and Department of Insurance Director 

Washington, District of Columbia 

April 3, 2013 

Mr. Chairman and distinguished members of the committee, I will provide testimony regarding 

Ohio's experience with high risk pools as created under the Affordable Care Act (ACA). I will 

discuss state regulatory authority, the impacts of the ACA in Ohio, issues our Department had 

with the ACA high risk pool program and concerns we have with the ACA moving forward. 

States have regulated insurance for decades based on the specific needs of their populations. 

Over the years Ohio has taken advantage of state regulated insurance in order to address our 

individual market and our consumers. Unfortunately, states will no longer have the ability to 

make decisions based on the needs of their consumers and their job creators. 

Prior to the ACA, states took very different paths in addressing the health care needs of their 

citizens. Ohio's ACA created high risk pool caused regulatory problems and confusion that 

resulted in disagreements between Ohio and the federal government. 

The conflicts led to disagreements on rates for the program and eventually a lawsuit over 

consumer eligibility for the program. Based on the experiences that we had with the federal 

government overseeing the high risk pool, we fear that similar problems will arise as the ACA is 

fully implemented. 

1 
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80809.013

The Committee on Energy and Commerce, Subcommittee on Health 

Statement of Mary Taylor, 

Ohio Lt. Governor and Department of Insurance Director 

Washington, District of Columbia 

April 3, 2013 

Mr. Chairman and distinguished members of the committee, thank you for the opportunity to 

testify this afternoon. My name is Mary Taylor and I am Ohio's Lt. Governor and also the 

Director of the Ohio Department of Insurance. I appreciate the opportunity to testify before 

you today regarding Ohio's experience with the high risk pool program under the Affordable 

Care Act (ACA). 

States have regulated insurance for decades based on the specific needs of their populations, 

economies and insurance markets. Nationally, all insurance commissioners are members of the 

National Association of Insurance Commissioners (NAIC) which is the U.S. standard-setting and 

regulatory support organization created and governed by the chief insurance regulators from 

the 50 states, the District of Columbia, and the five U.S. territories. Through the NAIC, state 

insurance regulators establish standards and best practices, conduct peer review, and 

coordinate their regulatory supervision to ensure fair oversight of the insurance industry and 

consistent consumer protections. NAIC members, together with the central resources of the 

NAIC, form the national system of state-based insurance regulation in the U.S. 

1 
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80809.014

Over the past 60 years, under the leadership of many different administrations, our 

Department has managed and regulated a competitive insurance market for consumers and job 

creators. Our efforts have helped us achieve better choice and pricing not just for health 

insurance, but across all lines of insurance. We take great pride in these accomplishments and 

attribute our success to the professional and experienced staff we have working on behalf of all 

Ohioans. 

The mission of the Department of Insurance is to provide consumer protection through 

education and fair but vigilant regulation while promoting a stable and competitive 

environment for insurers. We consider consumer protection our primary function. 

Our Department's Product Regulation and Actuarial Service division is charged with reviewing 

premium rates and contracts to ensure they adhere to state laws and regulations, and 

providing guidance to the industry and legislature on insurance issues. Along with policy and 

rate review, the division also licenses multiple employer trusts, alliances and health insuring 

corporations and accredits independent review organizations. Our Department's Market 

Conduct Division works to investigate and oversee insurer conduct in the marketplace. In 

addition, our Consumer Services Division assists consumers who have questions about their 

insurance policies, the claims process, and filing complaints when necessary. Finally, our Risk 

Assessment Division closely monitors the financial condition of insurance companies doing 

business in Ohio by conducting in-house analyses offinancial statements, overseeing insurers' 

2 
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80809.015

statutory and solvency compliance on an ongoing basis and conducting periodic on-site 

examinations. 

The Department of Insurance leverages these divisions, and others, to review all insurance 

products sold in Ohio, ensure the premium rates are actuarially justified, adequate, and nondiscriminatory and assist consumers. Overall, our Department ensures companies are solvent 

while monitoring their conduct in order to protect consumers from practices that do not meet 

the highest standards. 

Our department oversees 250 Ohio based insurance companies, 205,000 licensed insurance 

agents and agencies, verifies $485 million in premium tax collected by the state and operates a 

number of consumer service programs that helped Ohioans save $24.4 million in 2012. The 

$58.7 billion of premium written in Ohio by the 1,636 insurance companies licensed to sell in 

our state make Ohio the seventh largest insurance market based on premium in the United 

States and the 22nd largest in the world. 

Because of this regulatory environment, and the size of our market, Ohio has a very 

competitive health insurance market with numerous companies writing health insurance 

business from which Ohio consumers can choose. In order to determine the impacts of the ACA 

on Ohio's vibrant market, my department commissioned a report conducted by Milliman Inc. in 

2011 that looked specifically at the Ohio insurance market pre-ACA and projected its impact on 

Ohio moving forward. 

3 
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This report projected average premiums would increase in the individual market in Ohio 

between 55 percent and 85 percent. Specifically, Milliman projected a healthy young male in 

the individual market may experience a rate increase between 90 percent and 130 percent, but 

that a 60 year old with chronic health conditions may experience a premium decrease. In the 

small group market average premium increases were projected to be less dramatic at 5 percent 

to 15 percent overall. However, the report also projected the potential for significant rating 

variance in the small group market resulting in premium increases of up to 150 percent or a 

premium decreases of nearly 40 percent for groups at opposite ends of the current rating 

structure. Finally, the report noted that the previously outlined increases in premium do not 

account for medical trend, which Milliman noted has been rising 7 to 8 percent nationally. 

In addition to significant changes to insurance premiums, the report projected a substantial 

shift in how people get their coverage. The individual market in Ohio is projected to more than 

double while employer sponsored insurance (E51) in the small group market is projected to 

decrease by 28 percent. The report also projected changes to other ESI markets including a 

decrease to the large group market of 27 percent and the self-funded market of about 2 

percent. 

These impacts demonstrate concerning and, for many Ohioans, negative changes to our market 

in addition to the fact the law does little in the way of trying to actually reduce the underlying 

cost of care that has historically been driving the increasing cost of health insurance coverage. 

4 
28 


80809.017

Instead, the law exacerbates the cost by mandating additional benefits, levying additional taxes 

and fees on the health industry and adding more people into an already unsustainable system. 

The ACA is a one-size-fits-all, national approach to health care that takes the flexibility away 

from states and is laden with very narrow and rigid regulations that will only further the 

problems in our system, not help alleviate them. Over the years Ohio has taken advantage of 

state regulated insurance - a right all other states have had prior to the ACA - in order to 

address our individual market and our consumers. Unfortunately states will no longer have the 

ability to make decisions based on the needs of their consumers and their job creators. 

There are many examples demonstrating the extensive new red tape and regulatory impacts of 

the federal government's one-size-fits-all approach to health care. One example starting to 

receive national attention is the application process American consumers will have to go 

through in order to obtain health insurance through the exchanges. As drafted now, the 

application appears to be page after page of information consumers must provide concerning 

their eligibility to access coverage and their ability to qualify for tax credits and subsidies. The 

application will be burdensome to consumers and cannot be altered by states even though 

states have been regu lating insurance for decades and may have better and more efficient 

solutions for helping consumers through the enrollment process. 

Instead of facing such a centralized bureaucracy of health care, states should have the ability to 

evaluate the challenges facing their populations and implement more localized solutions. Prior 

5 
29 


80809.018

to the ACA, states took very different paths in addressing the health care needs of their citizens. 

One concept that has been around for years - and several states had been using to address the 

needs of their populations - is the high risk pool. Just like the exchange concept, both can be 

useful tools to address concerns about access to health insurance coverage, if done well. 

Pre-ACA several states had high risk pools in place to address the needs of individuals with preexisting conditions. However, implementing them as mandated in the ACA has been 

problematic and eventually bankrupted the program (as House leadership pointed out in the 

letter to President Obama dated March 5, 2013). 

The ACA mandated high risk pool programs were often times just a heavy handed and 

bureaucratic extension of the federal government. The poor management of the program led 

to their unsustainability and, ultimately, the untimely decision to close enrollment in the 

program earlier this year. 

Ohio's high risk pool was set-up being administered by an Ohio licensed private health insurer, 

but funded by the United States Department of Health and Human Services (HHS). 

The Department of Insurance retained its general authority over the high risk pool, including 

the right to regulate the rates and resolve consumer appeals, in addition to general oversight of 

the high risk pool program. 

6 
30 


80809.019

HH5 released a report for year-end 2012, which reported information on every state's 

enrollment, claims paid and administrative expenses. Based on the HH5 reported information, 

the Ohio high risk pool program ranked in the top ten for lowest administrative expenses and 

was in the top five for highest number of enrollees. The findings of the report show the Ohio 

program has some of the largest enrollment for ACA required, state run high risk pools, while 

being among the lowest in administrative costs. 

Even though the program administered by Ohio was among the most efficient and cost 

effective in the country, the overall set-up of the ACA mandated high risk pool program quickly 

caused problems and resulted in disagreements between the two agencies. The Department of 

Insurance's regulatory issues with HH5 left the Ohio administrator caught in the middle 

between two regulators. In 2011, as required under Ohio law, the Ohio administrator 

submitted rates for the two high risk pool plans to our Department for review and approval. 

The submissions included rate increases for both plans being sold in the high risk pool- a 3 

percent increase for the $2,500 deductible plan and a 17 percent increase for the $1,500 

deductible plan. 

As with all rates, our Department's staff reviewed these rate increases and believed them to be 

actuarially justified based on utilization and other factors pertaining to the experience of the 

group and approved the rates for use in Ohio. However, HH5 refused to approve the rates and 

directed the Ohio administrator to artificially reduce the rate increase for the $1,500 deductible 

7 
31 


80809.020

plan. In addition, HHS directed the program to artificially inflate the rates for the $2,500 

deductible plan, to further subsidize the lower deductible plan. 

As a certified public accountant and an insurance regulator whose primary concern relates to 

company solvency, forcing a company to artificially restrict rates and artificially inflate others 

causes serious solvency concerns down the line and puts the company at risk to not be able to 

pay their obligated claims. State regulators of insurance generally do not allow companies to 

subsidize one pool of business with another. As regulators, we must ensure that each block of 

business is solvent on its own and charging appropriate rates. Without these assurances it can 

be difficult at best to get a true picture of the ability of a company to continue to adjudicate 

and pay enrollee's claims. 

Eventually, HHS and the Department of Insurance were able to come to an agreement on rates 

that were acceptable to both parties, but this forced negotiation caused consumer confusion 

and pushed back renewal dates for the 2011-2012 policy year. Furthermore, the efforts of HHS 

to artificially manipulate rates, as well as several other changes HHS made related to the 

program, were a clear sign to the Department of Insurance the program would not be 

sustainable and would likely run out of funds before 2014. 

Shortly after the problems with the rates were resolved, we began having eligibility disputes 

with HHS related to consumers with current or previous coverage applying for the high risk 

8 
32 


80809.021

pool. As the primary regulator, the Department of Insurance had the ability to make final 

determinations on eligibility appeals. 

Our Department was reviewing eligibility appeals from Ohioans who had applied to the high 

risk pool program but had been determined ineligible by the Ohio administrator (in 

consultation with HHS). The Department of Insurance believed that these consumers in fact 

should be eligible because their previous coverage was not considered "creditable". However, 

HHS demanded the Ohio administrator ignore our Department's determination and instead 

follow HHS' directions. 

Further, HHS forced the Ohio administrator to remove Ohio high risk pool members who had 

already been admitted to the program, in some cases for months, because it deemed their 

previous coverage "creditable." Ohioans who were clearly eligible for the high risk poolaccording to our Department's review of their specific cases - were forced out of the program 

by HHS causing them to lose their only available source of coverage. 

After protracted discussions between the Department of Insurance, the Ohio administrator, 

and HHS, it became clear that HHS would not recognize our Department's authority to make 

these determinations leading the Ohio administrator to file a lawsuit against both parties 

seeking clarification from the courts as to which party they were bound to follow. An 

agreement was eventually reached in which our Department's regulatory authority was upheld. 

9 
33 


80809.022

But this several month long ordeal demonstrated the federal government's propensity to 

overreach and disregard state regulation of insurance that resulted in harm to consumers in the 

process. Due to the nature of the consumers applying for coverage in the high risk poolOhioans with pre-existing conditions and in need of urgent medical attention - this dispute and 

subsequent litigation caused unnecessary confusion and concern for the Ohioans stuck in the 

middle. 

While Ohio's high risk pool experience has come with challenges to say the least, we feel this 

tool- designed to help consumers find coverage they cannot secure anywhere else - is not 

without merit. However, as you seek to obtain additional funding to allow this program to 

continue to accept individuals through 2013, we encourage you to continue pressing for more 

flexibility and less red tape to ensure states are given the control they need to tailor this type of 

program to the needs of their citizens. Doing so would help consumers while avoiding some of 

the very issues that have plagued our high risk pool since 2011. 

Based on the experiences that we had with the federal government overseeing the high risk 

pool, we fear that similar problems will arise as the ACA is fully implemented. We feel these 

fears are very real and pose a threat not just to regulation of health insurance in Ohio but 

across the country. 

States have traditionally regulated insurance and are well equipped to do so. We have 

appropriate regulatory processes in place to oversee insurer pricing, market conduct and 

10 
34 


80809.023

solvency. Just as with the high risk pool in Ohio, when a federal agency steps into a role in 

which they do not have experience or the expertise to properly understand the issue, it can 

have severe consequences for the market and consumers. 

Knowing the challenges that lie ahead, I encourage members of Congress to continue working 

toward a better solution. For states like Ohio, better alternatives cannot come quickly enough. 

In the meantime, we will continue to focus our energy on areas of Ohio's health care system we 

can control. Our administration will continue our work to improve quality of care in Ohio, 

reduce costs, improve patient outcomes and truly reform Ohio's health care system. We have 

made significant progress over the past two years and feel it is essential to maintain our focus 

on moving Ohio forward. 

Thank you for allowing me the opportunity to testify here today, and I am happy to answer any 

questions you may have. 

### 

11 
35 


80809.024

ATIACHMENT 

Executive Summary of the 

Milliman Report 

dated August 31, 2011 

12 
36 


80809.025

1 

Prepared for: 

Ohio Depal'lment of Insurance 

Prepared by' 

Jeremy D. Palmer, FSA, MAAA 

Principal and Consulting Actuary 

Jill S. Herbold, FSA, MAAA 

Consulting Actuary 

PauIR.Houchen~FSA,MAAA 

Consulting Actuary 

Milliman. Inc 
37 


80809.026

The Patient Protection and Affordable Care Act of 2010 and the Heallh Care and Education Reconciliation Act of 

2010, collectively referred to as Ihe Affordable Care Act (ACA), introduces significant changes in covered benefits, 

premium rating and underwriting, carrier regulation, and the overall issuance of health insurance coverage in the U.S. 

Certain changes have already occurred, while the majority of the impacts will begin on January 1, 2014. This is the 

date when all states must have both an individual markel exchange and a Small Business Health Options Program 

(SHOP) exchange in operation, or demuilio a federally run exchange. This includes significant changes in Ihe benefit 

offerings and underwriting of insurance policies bolh inside and outside Ihese required exchanges. 

The primary ACA requirements for the commercial employer-sponsored (ESI)-small group and Individual hea~h 

Insurance markets, both inside and outside the exchanges, include: 

Guaranteed issue of insurance coverage regardless of pre-existing medical conditions or haalln status 

Adjusted community raling with premium rate vanations only for benefrt plan design, geographic location, age 

raling (limited to ratio of 3:1), family status, and tobacco usage (Iimtted to ratio of 1.5:1) 

Premium rate conSistency inside and outside the exchanges 

Ability of states to merge the ESI-small group and individual hea~h Insurance marnats 

Ability of slat as to define small group up to 100 employees (mandatory by January 1, 2016) 

Definition and requirements for essential health benefits 

Individual tax penalty if nol covered by minimum essential insurance coverage 

Employer tax penalily if not offering qualified insurance coverage (groups under 50 employees exempt) 

The ACA also includes a significant expansion of the slale Medicaid program to include all U.S. citizens and qualified 

legal aliens who ara not eligible for Medicare, under age 65, and wilh household income up to 133% of the federal 

poverty level (FPL) based on modified adjusted gross income (MAGI), or 138% of FPL wrth the 5% income disregard. 

These changes are certain 10 impact the curren! source of heetth insurance coverage for a large number of Ohioans. 

The key question is, to what extent are the current markets going to be impacted? More specifically, what will the 

Ohio insurance markel look like in 2014 and beyond? While the exact impacts are not known, this report used a 

model developed to illustrate the polentlal landscape of the Ohio insurance market in 2014 (initial year) and in 2017 

(mature year). The estimates take into account the potential behavior of individuals and employers based on income 

level, 8g9, and heaHh status. Figure 2-1 illustrates Ihe estimated changes in Ihe sourea of coverage for 2010 to 2014 

and 2017. It should be noted thallhese results assume Ihat the slate does not implement a Basic Health Program. 
38 


80809.027

'0000000 

9000000 

I 

8,000,000 

7,000,000 

c 

~ 6,000,000 f 5,000,000 E 

r .., 4,000,000 

i 3,000,000 

'" 2,000,000 

1,000,000 

2010 2014 2Q17 

Calendar year 

, Uninsured 

Individual 

ESt-small group (1-100 ... ) 

n ESI-Iarge group (> 100 ees) 

$ ESt-self-funded 

Public progralll$ 

The primary observations for calendar year 2017 (as compared to 2010) from the model results used to develop 

Figure 2-1 include: 

The individual health insurance markel increases by approximately 110% or 390,000 lives 

The public programs increase by approximately 52% or 1,070,000 lives 

The ESI-small group markel decreases by approximately (26%) or (260,000) lives 

The ESI-Iarge group markel decreases by approximately (27%) or (310,000) lives 

The ESI-self-funded market decreases by approximately (2%) or (90,000) lives 

The uninsured population decreases by approximately (53%) or (790,000) lives 

The premium rates in the various markets are expected to react to the movement of individuals summarized above 

This indicates that the model used to develop this report assumed thai the heatthcare cost of each individual is unique 

and thai as they move to another markel segment their associated costs go with them. The minimum benefit 

standards required in the ACA will also impact the premium rates \0 the extent they are higher standards than the 

current markets. Our analysis estimates that the premium rates may change as follows: 

Plior to the application of the premium tax credit subsidy, the individual health insurance market premiums 

are estimated \0 increase by 55% 10 85% above current market average rates (excluding the Impact of 

medical inflation). This is primarily dnven by the estimated health status of the new individual health 

insurance market and the expansion of covered benefits. Current insured benefit expenses 10 the individual 

market are approximately 40% less than the ESI-small group market: This is attributable to loday's individual 

markel having leaner covered benefits. such as the exclUSIon of maternity services, and a lower-cost 

population relative to the ESI markets 
39 


80809.028

It is estimated that the post-ACA individual market will have average benefit coverage levels more 

comparable to the small group merkel. It is also anticipated that this new indiVidual markel will be less 

healthy compared to the ESI market populations. For Ihese reasons, premiums in the individual heanh 

insurance market post-ACA are estimated to be 8%-12% higher than the ESI-smali group markel, post ACA 

reforms. 

The ESI-small group market premiums are estimated to increase by 5% to 15% above current market 

average premium rates (exciuding the impact of medical inflation). This is primarily driven by the estimated 

heaHh status of the remaining ESt-small group market, ACA-imposed insurance carrier fees, and provider 

cost shifting from the public programs. 

The ESI-Iarge group market premiums are estimated to increase by 3% to 5% above current market average 

premium rates (excluding the impact of medical inflation). This is primarily driven by the ACA-imposed carrier 

fees and provider cost shifting from the public programs. 

It should be noted that these increases will be in addition to regular expected heaHhcare inflation. The 2011 

Milliman Medical Index reported 7% to 8% annual trends for the fourth year in a row: 

The premium change estimates Illustrated above represent the estimated average premium impact 10 each of the 

market segments II is important 10 note thet individual polieyholders and ESI-group poliey premiums will have 

significant variability as a result of the ACA requirement for adjusted community rating (ACR) Individuals and smaller 

employers will observe tha greatest impacts since they are more likely to be at one extreme or the othar of the tolal 

currenl premium range (i e. heaHh status tier, age band, and gender category). 

In the individual market, a healthy young male (with benelil covarage at the market average actuarial value 

pre and posl-ACA) may experience a rala increase of between 90% and 130%. However, a 60 year old with 

chronic health condttions may experience a significant premium decrease. 

In the ESI-small group market, rating changes may result in a premium increase of 150% or a premium 

decrease of nearly 40% for groups at opposite ends of the current rating structure. 

Rate change variability attributable to ACR may result in healthier insured risks leaving the insured risk pool, 

while attracting a greater proportion of less healthy risks. 

This estimated premium impact includes the combination of items impacting tha entire market (such as minimum 

benelils and risk pool composition changes) as well as the items thaI mainly impact the lowest or highast extremes of 

the current premium range (such as restriction of age rating to a 3.1 ratio, removal of health status underwriting, and 

the elimination of gender rating). SimilarlY, individuals and ESI-small groups who consist of older ages, higher health 

risks, and higher female concentration will exparience lower than average premium rate changes as a result of the 

subsidies created by ACR. 

The changes which will result from to ACA will be significant. The task of implementing these regulations will require II 

significant amount of leadership and collaboration among the state, carriers, employers, consumers, brokers and 

agents, and providers. The key will be finding the issues that can be regulated by poliey and using that aulhorily to 

ensure as much market stability as possible through this period of change 
40 


80809.029

ATTACHMENT 

Pre-Existing Condition 

Insurance Plan Data 

dated December 31, 2012 

13 
41 


80809.030

Pre-Existing Condition Insurance Plan Data as of December 31,2012 

The Affordable Care Act created the new Pre-Existing Condition Insurance Plan (PCI?) program to make 

health insurance available to Americans denied coverage by private insurance companies because of a 

pre-existing condition. People living with conditions like diabetes, asthma, cancer, and HIV/AlDS have 

often been priced out of affordable health insurance options, and this has left millions without insurance. 

PCIP is a temporal)' program that covers a broad range of health benefits and is designed as a bridge for 

people with pre-existing conditions who cannot obtain health insurance coverage in loday's private 

insurance market. A range of professional, inpatient and drug treatments were provided to these 

individuals. 

In 2014, all Americans - regardless oftheir health status - will have access to affordable coverage either 

through their employer or through new competitive marketplaces called Exchanges, and insurers will be 

prohibited from charging more or denying coverage to anyone based on the state of their health. 

The PCfP program is administered by either the state or the federal government: 27 states have chosen to 

run their own programs, while 23 states and the District of Columbia elected to have their PCIP program 

administered by the federal government. 

The PClP program began accepting applications for enrollment in July 20 I O. Like private insurance 

plans, PCI? programs may incur expenses daily, but often do not submit claims for reimbursement until 

several weeks later. Accordingly, CCIIO will be posting data on a quarterly basis. 

It is important to note that the PCIP interim final rule places a limit of 10 percent on administrative costs 

over the life of the program. HHS anticipates that our overall administrative costs will be at 10 percent or 

less over the life of the program, especially after one-time startup investments have been made. We 

continue to monitor these costs closely. 

The chart below details reported expenditures paid as of December 3 J, 20 J 2 1 

1 These figure, reflect claims and administrative costs paid as of December 31, 2012 and do not reflect costs that are Incurred 

but not reported. 
42 


80809.031

State-run PCIP Expenditures bv State 

Administrative Expenditures 

Expenses Paid Net of Premium 

Enrollment as Claims Paid as as of Revenue as of 

of December of December 31, December 31, December 31, 

State Name 31,2012 2012 2012 20U1 

Alaska 45 $10,941,022 $759,095 $10,675,417 

Arkansas 855 $12,107,536 $1,882,893 $10,279,752 

California 15101 $446,930,880 $24,463,874 $415,847,028 

Colorado 1331 $70,569,572 $3,030,334 $62,323,548 

Connecticut' 577 $ 5,878,489 $1,669,592 $5,882,701 

Illinois 3231 $79,224,278 $2,168,471 $63,672,037 

Iowa 384 $12,241,308 $1,432,626 $10,985986 

Kansas 519 $24,763,688 $1,232,127 $22,612,656 

Maine 48 $2,650,790 $64,376 $2,166,825 

Maryland 1316 $28,055,806 $2,977,148 $25,745,115 

Michigan 2040 $61,140,009 $2091,275 $56,573,363 

Missouri 2104 $53,496,193 $2,677,717 $46,618,679 

Montana 333 $16,019,970 $1,047,718 $14,098,554 

New Hampshire 662 $42,963,920 $1,276,387 $40,072,868 

New Jersev 1363 $53,945,439 $1,183,450 $45,252,719 

New Mexico 1398 $41,424,035 $1929,526 $34,475,433 

New York 5133 $141,947,406 $12,618,389 $128,019,638 

North Carolina 5238 $40,354,000 $6,649,003 $25,446,090 

Ohio 3333 $82,202,953 $2,567,154 $64,540,602 

Oklahoma 952 $31,9\0,127 $1,826,898 $28,443,300 

Oregon 1550 $75,560,690 $1,451,739 $60,247,598 

Pennsylvania 6593 $103,867,537 $6,1I8,392 $77,070,945 

Rhode lsland 155 $7,164,815 $1,341,651 $7,002,801 

South Dakota 191 $16,523,116 $462,809 $15,054,822 

Utah 1248 $47,003,561 $963,151 $41,477,476 

Washington 1013 $58,741,331 $2,836,958 $50,025,811 

Wisconsin 2013 $21,682,406 $2,326,071 $]4,916,985 

TOTALS 58,726 $1,589,310,877 $89,048,823 $1,379,528,747 

, PCI? members pay premiums. This premium revenue pays for some of the cost of the PetP program. However, as a high risk 

pool, PClP members incur expenses that exceed premiums paid The $S billion for the PCIP program covers the expenses In 

excess of premiums paid. The "expenditures net of premium revenue" equal the total expenses, claims and administrative, 

minus the total premium revenue. 

'Connecticut's expenditure numbers (claims, administrative and expenditures net premium revenue) are through September 

30 instead of December 31 because the state was unable to report complete data for the full quarter. 
43 


80809.032

Federal! -run PCW Expenditures by State 

Administrative Expenditures 

Enrollment Expenses Paid Net of Premium 

as of Claims Paid as as of Revenue as of 

December of December 31, December 31, December 31, 

State name 31,2012 2012 20124 20125 

Alabama 838 $22,033,383 N/A NlA 

Arizona 4628 $92,776,075 N/A N/A 

Delaware 302 $3,805,722 N/A N/A 

District of Columbia 81 $1,590,448 N/A N/A 

Florida 10635 $201,897,272 N/A N/A 

Geol'!1;ia 3571 $78,351,726 N/A N/A 

Hawaii 151 $4,131,525 NJA N/A 

Idaho 791 $41940,039 N/A N/A 

Indiana 1827 $36,160,193 N/A N/A 

Kentncky 1352 $18,627,492 N/A N/A 

Louisiana 1485 $21,032,061 N/A N/A 

Massachusetts" J7 $478,371 N/A N/A 

Minnesota 796 $12,134,933 N/A N/A 

Mississippi 347 $ 13,024,679 N/A N/A 

Nebraska 398 $13,599,247 NlA NlA 

Nevada 1320 $33,762,072 NlA N/A 

North Dakota 89 $3'2~ N/A N/A 

Sonth Carolina 1950 $45,09 , N/A N/A 

Tennessee 1833 $41,205,235 N/A N/A 

Texas 9032 $363,560,460 NlA N/A 

Vermont 1 $135,875 N/A N/A 

Virginia 2521 $46,319,674 N/A N/A 

West Virginia 185 $3762,422 N/A N/A 

Wyoming 284 $5,273,697 NfA N/A 

TOTALS 44,434 $1,103,977740 $87752,4917 $1026,762,600 

4 Administrative expenses and expenditures net of premium revenue were not available for the federally run slates. 

5 AdministratIve expenses and expenditures net of premium revenue were not available for the federally run states 

• Massachusetts and Vermont are guarantee issue states that have already implemented many of the broader market reforms 

included in the Affordable Care Act that take effect in 2014. Existing commercial plans offering guaranteed coverage at 

premiums comparable to PCI? are already available in hoth states 

, Figure does not reflect CCIIO administrative costs. 
44 

Mr. PITTS. The Chair thanks the gentlelady for her statement 

and recognizes Dr. Collins for 5 minutes for an opening statement. 

STATEMENT OF SARA R. COLLINS 

Ms. COLLINS. Thank you, Mr. Chairman, for this invitation to 

testify on the Affordable Care Act’s Preexisting Condition Insurance Program. 

The major coverage provisions of the Affordable Care Act go into 

effect in January 2014, providing new insurance options for people 

without health insurance and sweeping new insurance market reforms to protect people who must buy health plans on their own. 

The Congressional Budget Office projects the combination of new 

federal subsidies for insurance and consumers protections will 

newly insure at least 27 million people by 2021. 

The PCIP program was one of several provisions of the law that 

went into effect in 2010 aimed at providing a bridge to 2014 for 

people who have been particularly at risk of being uninsured or 

poorly insured. About 135,000 previously uninsured people with 

health problems who are not able to gain coverage in the individual 

market because of their health have enrolled in the PCIP program 

since 2010. The program has succeeded in providing transitional 

support for thousands of people who were uninsurable in the individual market. The 50-State program provided more affordable coverage than people could gain in most existing State high-risk pools 

which operated in only 35 States and, unlike most State high-risk 

pools, the PCIP program offered immediate coverage of preexisting 

conditions. 

But the program’s limitations were expected from the outset and 

demonstrate why high-risk pools in general are an inadequate substitute for the comprehensive insurance market reforms and expanded health insurance options to go into effect under the Affordable Care Act next January. The PCIP’s low enrollment relative to 

the millions of uninsured Americans with serious chronic health 

problems reflects the program’s lack of premium subsidies. This 

means that its potential benefits are out of reach for the vast majority of the population. Seventy-nine percent of the estimated 7 

million people who have a high-cost health problem who have been 

uninsured for at least six months have annual incomes of less than 

400 percent of poverty. Half have incomes of less than 200 percent 

of poverty. In the Texas PCIP program, the annual premium for a 

plan with a $2,500 deductible is about $3,800. For a person with 

an income of about $11,000, the premium would comprise one-third 

of his income and the deductible 22 percent of his income. 

Like the existing State high-risk pools, premiums in the PCIP 

have run well short of claims cost. Jean Hall and Janice Moore 

found that medical claims relative to premiums or the medical loss 

ratios in both State high-risk pools and the PCIP program exceed 

100 percent but that the PCIP medical loss ratios are as much as 

seven times that of high-risk pools in some states. This difference 

in medical spending between the two risk pool programs is likely 

because the PCIP program provides immediate coverage of people’s 

health problems. Combined with the fact that people must be uninsured for 6 months, this has likely led to an overrepresentation of 

people in the program with serious health problems that have gone 

45 

untreated for a long period of time. The top four diagnoses or treatments in the federal PCIP program are cancers, heart disease, degenerative bone diseases, and follow-up care after major surgery or 

cancer treatments. These conditions comprise more than a third of 

claims costs in the federal program. 

The experiences of both the PCIP program and the State highrisk pools demonstrate the profound inefficiency of segmenting insurance risk pools. Without the benefit of a broad and diverse 

group of insured people, both programs operate at a considerable 

loss and depend on federal and State financing to fund the enormous gap between premiums and claims cost. Still, because of the 

high premium costs, both programs suffer from low enrollment. 

The Affordable Care Act’s insurance market reforms take effect 

next year, making it possible for people with health problems or 

who are older to purchase a health plan with a comprehensive benefit package. The expanded eligibility for Medicaid and premium 

tax credits for private plans sold through the new insurance marketplaces means that people with low and moderate incomes with 

health problems will face far lower premiums than they do now in 

the PCIP program. For example, a 50-year-old man with an income 

of $23,000 would contribute about $1,400 annually for a private 

plan offered through the State insurance marketplaces next year. 

In contrast, annual premiums for 50-year-olds at this income level 

in the PCIP program exceed this contribution by nearly two times 

in Virginia, which has the lowest PCIP programs, to more than 10 

times in Alaska. 

Starting in January, enrollees from both the PCIP program and 

the State high-risk pool will join millions of new enrollees in the 

new State insurance marketplaces with a diverge age and health 

profile, which will help spread the costs of care across a much 

broader risk pool. 

One of the central goals of the Affordable Care Act is to pool risk 

in insurance markets far more broadly than is the case today. Extensive segmentation of risk in insurance markets has fueled 

growth in the number of uninsured Americans over the past several decades. The experience of both the PCIP program and the 

State high-risk pools underscores why a shared responsibility for 

health care costs across the population and the lifecycle is essential 

for an equitable and efficiently run health insurance system. Thank 

you. 

[The prepared statement of Ms. Collins follows:] 

46 


80809.033

THE AFFORDABLE CARE ACT'S PRE-EXISTING CONDITION INSURANCE 

PLAN PROGRAM: A CRITICAL BRIDGE TO 2014, BUT NOT A lONG-TERM 

SOLUTION FOR UNIVERSAL COVERAGE 

Sara R. Collins, Ph.D. 

Vice President, Affordable Health Insurance 

The Commonwealth Fund 

One East 75th Street 

New York, NY 10021 

src@cmwf.org 

Invited Testimony 

Committee on Energy and Commerce, Subcommittee on Health 

United States House of Representatives 

Hearing on "Protecting America's Sick and Chronically III" 

April 3, 2013 

The author thanks Jean P. Hall, Ph.D., and Janice M. Moore of the University of Kansas, who 

have tracked the implementation of the PClP program for The Commonwealth Fund since the 

program's inception. Their insightful research forms the basis of much of this testimony. At The 

Commonwealth Fund, Tracy Garber and Petra Rasmussen provided research assistance, and 

Cathy Schoen, Tony Shih, Chris Hollander, and Paul Frame provided helpful comments and 

editorial assistance. 

The views presented here are those of the author and not necessarily those of The 

Commonwealth Fund or its directors, officers, or staff. To learn more about new publications 

when they become available, visit the Fund's website and register to receive email alerts. 

Commonwealth Fund pub. no. 1680. 
47 


80809.034

The Affordable Care Act's Pre-Existing Condition Insurance Plan Program: 

A Critical Bridge to 2014, But Not a Long-Term Solution for Universal Coverage 

Sara R. Collins, Ph.D. 

The Commonwealth Fund 

EXECUTIVE SUMMARY 

Thank you, Mr. Chairman, for this invitation to testify on the Patient Protection 

and Affordable Care Act's Pre-Existing Condition Insurance Plan (PClP) Program. The 

major coverage provisions of the Affordable Care Act go into effect in January 2014, 

providing new insurance options for people without health insurance and sweeping new 

insurance market reforms to protect people who must buy health plans on their own. 

The Congressional Budget Office projects that the combination of new federal subsidies 

for insurance and consumer protections will newly insure at least 14 million people in 

2014, and 27 million by 2021. 

The PClP program was one of several provisions of the law that went into effect 

in 2010 aimed at providing a bridge to 2014 for people who have been particularly at 

risk of being uninsured or poorly protected by their health insurance. Millions of adults 

and children with chronic health problems and young adults have benefited from these 

provisions, which included bans on lifetime benefit limits and preexisting condition 

exclusions for children. About 135,000 previously uninsured people with health 

problems who were not able to gain coverage in the individual insurance market 

because of their health have enrolled in the PClP program since August 2010. 

The PClP program has succeeded in offering transitional support for thousands 

of people who would otherwise have been uninsurable in the individual insurance 

market. The 50-state program provided more affordable coverage than people could 

gain through the individual insurance market and most existing state high-risk pools, 

which operate in only 35 states. And, unlike most state high-risk pools, the PCIP 

program offered immediate coverage of preexisting conditions for people with serious 

health problems. The program has been a critical bridge to 2014, but its limitations 

demonstrate why high-risk pools are an inadequate substitute for the comprehensive 

insurance market reforms and expanded health insurance options to go into effect 

under the Affordable Care Act next January. 

2 
48 


80809.035

The PCIP Program Has Experienced Lower-than-Expected Enrollment 

The program's low enrollment relative to the millions of uninsured Americans with 

serious chronic health problems reflects the program's lack of premium subsidies. This 

means that its potential benefits are out of reach for the vast majority of this 

population. An analysis of 2007 federal data found that 79 percent of the estimated 6.9 

million people with a high-cost health problem who had been uninsured for at least six 

months had annual incomes of less than 400 percent of the federal poverty level; half 

had incomes of less than 200 percent of poverty. 

In the Texas PClP program, for example, the premium for a plan with a $2,500 

deductible was $318 per month in 2012, or $3,816 for 12 months. For a person in Texas 

with an income of $11,500, or about 100 percent of poverty, the premium would 

comprise one-third of his income and the deductible, 22 percent of his income. Thus, 

even prior to out-of-pocket spending on coinsurance above the deductible, he would 

spend more than half of his annual income on premiums and out-of-pocket costs under 

the program. 

The PCIP Program Has Experienced Higher-than-Expected Per-Enrollee Claims Costs 

Like the existing state high-risk pools, premiums in the PClP program have run well short 

of claims costs. Jean Hall and Janice Moore of the University of Kansas found that 

medical claims relative to premiums (medical loss ratios) in both state high-risk pools 

and the PClP program exceed 100 percent, but that the PCIP medical loss ratios are as 

much as seven times that of high-risk pools in some states. 

This difference in medical spending between the two risk pool programs is most 

likely driven by the fact that the PCIP program provides immediate coverage of people 

with health problems. Combined with the fact that people must be uninsured for six 

months, this likely has led to an overrepresentation of people in the PCIP program with 

serious health problems that have gone untreated for a long period. CMS's analysis of 

the federal PClP program found that the top four diagnoses or treatments included 

cancers, ischemic heart disease, degenerative bone diseases, and follow-up medical care 

required after major surgery or cancer treatments. These four diagnoses comprised 

more than one-third (36%) of claims costs in the federal program in 2012. An analysis of 

one-year program claims found that costs were concentrated in a small number of 

enrollees: just 4.4 percent of PCIP enrollees accounted for more than half of claims paid. 

Hall and Moore also find evidence of a higher disease burden among PClP enrollees 

3 
49 


80809.036

compared with people enrolled in state high-risk pools. Costs per member per month in 

the PClP program are nearly nine times those in the state high-risk pools. 

High-Risk Pools Are Not a Long-Term Solution for Expanding Health Insurance 

Coverage 

The experiences of both the PClP program and the state high-risk pools demonstrate the 

profound inefficiency of segmenting insurance risk pools. Without the benefit of a broad 

and diverse group of insured people, both programs operate at a considerable loss and 

depend on federal and state financing to fund the enormous gap between premiums 

and claims costs. Still, because of the high premium costs, particularly relative to the 

modest incomes of the target population of uninsured people with chronic health 

problems, both programs suffer from low enrollment. 

Older Adults with Health Problems with Low and Moderate Incomes Will Face Far 

Lower Premiums in 2014 for Plans Offered Through the Marketplaces Compared with 

the PCIP Program 

The Affordable Care Act's sweeping insurance market reforms take effect next year, 

making it possible for people with health problems or who are older to purchase a 

health plan with a comprehensive benefit package. These reforms include: requiring 

insurers to offer all applicants an essential health benefit package similar to that offered 

by employers; banning insurers from charging people higher premiums based on health 

or gender; limiting what older people may be charged relative to younger people by a 

factor of 3:1; banning carriers from limiting or denying benefits because of preexisting 

health conditions; and requiring broad pooling of risk in state insurance markets to 

further reduce the ability of carriers to maintain higher rates on older or sicker 

enrollees. 

Expanded eligibility for Medicaid and premium tax credits for private plans sold 

through the new insurance marketplaces will help level the playing field between 

employer coverage and insurance that people must buy on their own for those with 

incomes under 400 percent of poverty. People with low and moderate incomes with 

health problems will face far lower premiums than they do now in the PClP program. 

For example, a 50-year-old man with an income of $23,011 would contribute 6.3 

percent of his income, or $1,450 annually, for a private plan offered through the state 

insurance marketplaces next year. In contrast, annual premiums for 50-year-olds at this 

4 
50 


80809.037

income level in the PClP program exceed this contribution by nearly two times in 

Virginia, which has the lowest PCIP premiums, to more than 10 times in Alaska. 

Conclusion and Policy Implications 

Federal and state policymakers can address the PCIP program's shortcomings in 

enrollment and costs by allowing its enrollees to transition to the new state insurance 

marketplaces and the expanded Medicaid program in January 2014, as Congress 

intended. State high-risk pools are also likely to end operation in January. Enrollees from 

both programs will join an estimated 7 million new enrollees in the new state insurance 

marketplaces next year, with a diverse age and health profile, which will help spread the 

costs of care across a much broader risk pool. Twenty-seven million people are expected 

to gain coverage through the marketplaces by 2018. 

The Congressional Budget Office estimates that the influx of young and healthy 

people into the marketplaces will lower premiums by 7 percent to 10 percent below 

what they are today in the individual market for an equivalent benefit package. 

Economies of scale and lower administrative costs from bans on underwriting will lower 

premium costs by an additional 7 percent to 10 percent. A nationwide reinsurance 

program that will go into effect next year will protect state insurance marketplaces that 

experience a disproportionately large influx of high-cost enrollees. 

One of the central goals of the Affordable Care Act is to pool risk in insurance 

markets far more broadly than is the case today in the United States. Extensive 

segmentation of risk in insurance markets has fueled growth in the number of uninsured 

Americans over the past several decades and has made the U.S. the industrialized 

world's unequivocal leader in the cost of insurance administration. The experience of 

both the PCIP program and the state high-risk pools over their 40-year history 

underscores why a shared responsibility for health care costs across the population and 

the life cycle is essential for an equitable and efficiently run health insurance system. 

Thank you. 

5 
51 


80809.038

The Affordable Care Act's Pre-Existing Condition Insurance Plan Program: 

A Critical Bridge to 2014, But Not a Long-Term Solution for Universal Coverage 

Introduction 

Thank you, Mr. Chairman, for this invitation to testify on the Patient Protection and 

Affordable Care Act's Pre-Existing Condition Insurance Plan (PClP) Program. The major 

coverage provisions of the Affordable Care Act go into effect in January 2014, providing 

new insurance options for people without health insurance and sweeping new 

insurance market reforms to protect people who must buy health plans on their own. 

The Congressional Budget Office projects that the combination of new federal subsidies 

for insurance and consumer protections will newly insure at least 14 million people in 

2014, and 27 million by 202l. 

The PCIP program was one of several provisions of the law that went into effect 

in 2010 aimed at providing a bridge to 2014 for people who have been particularly at 

risk of being uninsured or poorly protected by their health insurance. Millions of adults 

and children with chronic health problems and young adults have benefited from these 

provisions. In particular: 

• 135,000 previously uninsured people with health problems who were not able to 

gain coverage in the individual insurance market because of their health have 

enrolled in the PCIP program since August 2010. 1 

Health plans are banned from imposing preexisting condition exclusions for 

children: an estimated 17.6 million children have benefited. 2 

• Insurers can no longer place limits on what health plans will pay over a lifetime: 

105 million people with such limits have benefited. 3 This particularly benefits 

people with chronic health problems or who become seriously ill. 

18 million people who faced annual limits on what their health plans would pay 

are experiencing a gradual phase-out of those limits through 2013. This also 

particularly benefits people with health problems.4 

1 Centers for Medicare and Medicaid Services, Center for Consumer Information and Insurance 

Oversight, Covering People with Preexisting Conditions: Report on the Implementation and Operation of 

the Pre-Existing Condition Insurance Plan Program, Jan. 31, 2013. 

2 http://www.whitehouse.gov!sites!default!files!uploads!careact. pdf. 

3 Assistant Secretary for Planning and Evaluation, Under the Affordable Care Act, 105 Million 

Americans No Longer Face Lifetime Limits, available at http://aspe.hhs.gov. 

4 S. B. larson, Obamacare: Why the Need for Waivers? (Annual Limits Bridge Program), Testimony 

before the U. S. House Committee on Oversight and Government Reform Subcommittee on Health Care, 

6 
52 


80809.039

• Carriers cannot cancel policies retroactively: 10,700 people had policies 

rescinded each year prior to law's passage. 5 

• Health plans must cover recommended preventive care without cost-sharing, 

including a new set of preventive services for women: an estimated 71 million 

Americans in private health insurance plans received coverage for at least one 

free preventive health care service in 2011 and 2012 because of this new 

requirement. 6 

• An estimated 6.6 million young adults ages 19-25 stayed on or joined their 

parents' health plans, who likely would not have been able to do so prior to the 

passage of the law.7 

The law's major coverage provisions will build on this critical set of transitional 

reforms providing new, affordable health insurance options and protections to all 

Americans who have to buy coverage on their own, with particular safeguards for 

people with health problems and who are older. While the PCIP program has benefited 

thousands of people over the past three years who otherwise would have been without 

health insurance, the program's limitations demonstrate why high-risk pools are an 

inadequate substitute for the comprehensive insurance market reforms and expanded 

health insurance options to go into effect under the Affordable Care Act next January. 

This testimony examines the problems people with health problems currently 

face gaining coverage in the individual insurance market and how states have 

responded with high-risk pools. It discusses the experiences of the high-risk pools and 

the PCIP program in insuring people with health problems and looks ahead to the 

benefits for this population when the major coverage provisions go into effect next year. 

District of Columbia, Census, and The National Archives, U.S. House of Representatives (March 15, 2011), 

available at http://www.hhs.gov/asl/testify/2011/03/t20110315a.html. 

5 Department of Treasury, Department of Labor and Department of Health and Human Services, 

Patient Protection and Affordable Care Act: Requirements for Group Health Plans and Health Insurance 

Issuers Under the Patient Protection and Affordable Care Act Relating to Preexisting Condition Exclusions, 

Lifetime and Annual Limits, Rescissions, and Patient Protections; Final Rule and Proposed Rule (Federal 

Register, June 28, 2010), available at http://www.gpo.gov/fdsys/pkg/FR-2010-06-28/pdf/2010-15278.pdf. 

6 http:Uaspe.hhs.gov/health/reports/2013/PreventiveServiceslib prevention.cfm. 

7 S. R. Collins, R. Robertson, T. Garber, and M. M. Doty, Young, Uninsured. and in Debt: Why Young 

Adults Lock Health Insurance and How the Affordable Care Act Is Helping (New York: The Commonwealth 

Fund, June 2012). 

7 
53 


80809.040

The Individual Insurance Market is Not an Affordable or Accessible Option for People 

with Health Problems 

People who do not have access to employer health benefits and are ineligible for 

Medicaid are largely limited to purchasing coverage in the individual insurance market. 

But the individual market for most Americans is neither affordable nor easy to navigate. 

People buying coverage in the individual market must pay the full premium and, under 

current laws in most states, are rated on the basis of their health, gender, and age. They 

can also be denied coverage because of a preexisting condition or have their condition 

excluded from their health plan. 8 The Commonwealth Fund Biennial Health Insurance 

Survey of 2010 found that of an estimated 26 million adults who said that they tried to 

buy a health plan in the individual market between 2007 and 2010, 43 percent found it 

very difficult or impossible to find plan that fit their needs and 60 percent found it very 

difficult or impossible to find a plan they could afford (Exhibit 1).9 More than one-third 

(35%), or 9 million people, were turned down by an insurance carrier because of a 

health problem, charged a higher price because of a health problem, or had a specific 

health problem excluded from their coverage. 

8 M. M. Doty, S. R. Collins, J. L. Nicholson, and S. D. Rustgi, Failure to Protect: Why the Individual 

Insurance Market 15 Not a Viable Option for Most U.s. Families (New York: The Commonwealth Fund, July 

2009); K. Swartz, Reinsuring Health: Why More Middle Class People Are Uninsured and Whot Government 

Can Do (New York: Russell Sage Foundation, 2006); S. R. Collins, C. Schoen, K. Davis, A. Gauthier, and S. 

Schoenbaum, A Roadmap to Health Insurance for All: Principles for Reform (New York: The 

Commonwealth Fund, Oct. 2007); and N. C. Turnbull and N. M. Kane, Insuring the Healthy or Insuring the 

Sick? The Dilemma of Regulating the Individual Health Insurance Market-Findings from a Study of Seven 

States (New York: The Commonwealth Fund, Feb. 2005). 

9 S. R. Collins, M. M. Doty, R. Robertson, and T. Garber, Help on the Horizan: How the Recession Has 

Left Millions of Warkers Withaut Health Insurance. and How Health Reform Will Bring Relief-Findings 

from The Commonwealth Fund Biennial Health Insurance Survey of2010 (New York: The Commonwealth 

Fund, March 2011). 

8 
54 


80809.041

Exhibit 1. The Individual Insurance Market Is Not an Affordable Option for 

Many People, Particularly Those with Health Problems 

Adults ages 19-64 with individual No 

coverage* or who tried to buy it in Total Health health <200% 

past three years who: 

Found it very difficult or impossible 

to find coverage they needed 

Found it very difficult or impossible 

to find affordable coverage 

Were turned down. charged a 

higher price, or had condition 

excluded because of a 

preexisting condition 

Any of the above 

Note: FPl refers to federal poverty level. 

* Bou ght in the past three years . 

26 million 

43% 

11 million 

60% 

16 million 

35% 

9 million 

71% 

19 million 

problem" problem FPL 

53% 31% 49% 

70 46 64 

46 20 38 

83 56 77 

.... Respondent rated their health status as fair or poor. has a disability or chronic disease that keeps them from working 

full time or limits housework/other daily activities, orhas any ofthefollolNing chronK: conditions: hypertension or high 

blood pressure; heart disease, inclt.4ding heart attack: diabetes: asthma, emphysema. 

or lung disease: high cholesterol. 

Source: S. R, Collins. M. M. Doty. R. Robertson. and T. Garber, Help on the Horizon: How the Recession Has 

Left Mitfions of Worke~ Without Health insurance, and How Health Reform L4'ifl Bring Relief-Findings from 

The Commom'lealth Fund Biennial Health Insurance Survey of 2010. The Commonwealth Fund. March ;;:011, 

200%+ 

FPL 

35% 

54 

34 

64 

People with health problems found it particularly difficult to find an individual 

insurance plan. More than half (53%) of those with health problems who tried to buy 

coverage in the individual market found it very difficult or impossible to find a plan with 

the coverage they needed, compared with 31 percent of those without a health 

problem (Exhibit 1).10 Similarly, 70 percent of survey respondents with health problems 

said they found it very difficult or impossible to find an affordable plan, compared with 

46 percent of those in better health. And 46 percent were denied coverage by an 

insurance carrier because of a health problem, charged a higher price, or had a specific 

health problem excluded from their coverage. This was more than two times the rate 

(20%) reported by adults who did not have health problems. 

State High-Risk Pools 

Beginning in the 1970s, many states created high-risk pools to provide a means for 

people to gain health insurance when they were turned down or charged exorbitant 

10 People with health problems are defined as those reporting fair or poor health status, anyone of 

five chronic conditions, or a disability or condition that prevents them from working. 

9 
55 


80809.042

prices in the individual market. By 2011, 35 states were operating such pools, but total 

enrollment was just 226,000 people nationwide, or only 0.6 percent of the total 

uninsured population in those states. 11 Enrollment varies widely by state, ranging from 

just 208 people in Florida to 27,000 people in Minnesota. Following voluntary guidelines 

established by the National Association of Insurance Commissioners, most states make 

premiums more affordable by imposing premium caps for their high-risk pools, ranging 

from 125 percent of average individual market rates in Minnesota and Oregon to as high 

as 250 percent in Florida. Most states also vary premiums on the basis of age and 

gender. In addition, all states (with the exception of Alabama) impose waiting periods 

for coverage of preexisting conditions, ranging from three to 12 months.12 During this 

period, coverage of a condition that existed prior to enrollment is not covered unless 

someone transitions directly from other coverage, including COBRA when benefits are 

exhausted. Several states provide discounts or premium support for lower-income 

enrollees, but the generosity of the support varies widely.13 

There is tremendous variation in what the high-risk pool plans cover, the size of 

deductibles, and whether they impose maximum annual and lifetime benefit limits. For 

example, the Alaska high-risk pool plan with the most enrollees has a $10,000 

deductible, the highest among the states, compared with a $200 deductible for the 

most popular plan in Maryland. In nine states, the plans with the highest enrollment 

have $5,000 deductibles. Thirty states have maximum lifetime benefit limits, ranging 

from $750,000 in California to $5 million in Florida and Minnesota, and six states 

including have annual benefit limits as well. 

Even though premiums in high-risk pools are higher than those in the individual 

market, they have not been sufficient to finance the expensive claims made in these 

pools. In 2011, premiums on average provided only half (53%) of the funding for highrisk pools, ranging from 22 percent in New Mexico to 91 percent in South Carolina. 1

• 

Claims expenses across the 35 risk pools averaged 181 percent of premiums collected. 

New Mexico's ratio was more than 400 percent. 

11 National Association of State Comprehensive Health Insurance Plans, 2011, available at 

http:Unaschip.org/portal!index.php?option=com content&view=article&id-230. 

12 J. P. Hall and J. M. Moore, Realizing Health Reform's Potential: The Affordable Care Act's PreExisting Condition Insurance Plan: Enrollment, Costs, and Lessons for Reform (New York: The 

Commonwealth Fund, Sept. 2012). 

13 L. Achman and D. Chollet, Insuring the Uninsurable: An Overview of State High·Risk Health 

Insurance Pools (New York: The Commonwealth Fund, Aug. 2001). 

14 National Association of State Comprehensive Health Insurance Plans, 2011, available at 

http:((naschip.org(portal!index.php ?option=com content&view-article&id=230; 

10 
56 


80809.043

States have struggled to make up the difference between claims and premiums 

using a combination of approaches, including assessments on insurance carriers (29 

states) and state revenue funds such as general revenues and tobacco taxes (five 

states). Many states also receive federal grants directed toward specific initiatives, such 

as premium subsidies. But states also have tried to reduce their costs by: limiting 

enrollment through waiting periods for preexisting conditions; closing the pools to new 

enrollment (Florida's pool has just 208 members and has been closed to new enrollment 

since 1991); limiting the amount of time someone can be in the pool; imposing lifetime 

and annual benefit limits on coverage; negotiating more favorable provider payment 

rates; and increasing premiums, deductibles, and copayments. 

The PCIP Program 

To provide a transitional coverage option for people who are uninsured and who cannot 

gain coverage in the individual insurance market, the Affordable Care Act sought to 

build on the model of state high-risk pools but with more affordable premiums and 

consumer protections. The law allocated HHS $5 billion to subsidize the gap between 

premiums collected for the PClPs and claims costs between 2010 and 2013. As Jean Hall 

and Janice Moore of the University of Kansas point out, Congress intended the program 

to provide an immediate coverage source for people who were uninsured; it was not 

intended to extend coverage to those already insured.is Available in all 50 states and 

the District of Columbia, PClPs were open to people who have been uninsured for at 

least six months and who have a health problem that has made it difficult for them to 

gain health insurance. 16 PClPs cover a broad range of health benefits, including primary 

and specialty care, hospital care, and prescription drugs. Premiums are set for a 

standard population in the individual insurance market and cannot vary by more than a 

factor of four, based on age (i.e., 4:1 age bands). The PClPs are required to cover, on 

average, no less than 65 percent of medical costs and to limit out-of-pocket spending to 

$6,250 in 2013. They also cannot impose preexisting condition exclusions or, unlike 

state high-risk pools, waiting periods. 

The federal government invited states to submit applications to form their own 

PClPs, supported by federal subsidies to cover the difference between premiums and 

15 J. P. Hall and J. M. Moore, Realizing Health Reform's Potential: Enrollment, Costs, 2012. 

16 Department of Health and Human Services, "Pre-Existing Condition Insurance Plan Program," 

Interim Final Rule with Comment Period, July 29, 2010. 

11 
57 


80809.044

the cost of claims. Twenty-seven states elected to run their own plans. 17 States have 

flexibility in setting the size of the deductible, the level of coinsurance or copayments, 

and the scope of benefits, so there is variation in PClPs from state to state. Most states 

offer a choice of plans with deductibles ranging from $0 in New York and New Jersey to 

a $5,000 in-network deductible plan option in Illinois and Missouri. 18 And many states 

also have separate deductibles for prescription drugs. Some states, such as Washington 

and Maryland, have also offered plans with out-of-pocket maximums at $1,500, well 

below the federal standard.19 Monthly premiums vary according to deductibles and by 

state, ranging from a low of $195 per month for Illinois' $5,000 deductible plan to a high 

of $1,215 for Alaska's only plan option, which comes with a $1,500 deductible. 20 

The federal government is operating PClPs in the remaining 23 states and the 

District of Columbia. 21 Through 2012, the federal PClP offered three different plan 

options: $1,000 deductible for in-network medical services and $250 deductible for 

formulary prescription drugs; $2,000 in-network deductible and $500 prescription drug 

deductible; and a plan with a $2,500 in-network deductible. Monthly premiums ranged 

from a low of $214 in Virginia for the $2,000/$500 deductible option to a high of about 

$450 in Georgia, Mississippi, and Vermont for the lowest-deductible option. The lowestdeductible option in Massachusetts has a monthly premium of $559, but because the 

state has universal coverage with premium subsidies and insurance market reforms 

including bans on preexisting condition exclusions and health and gender rating, only 12 

people are enrolled in the program. 

To reduce program costs and ensure funding availability for current enrollees 

through the end of 2013, the Centers for Medicare and Medicaid Services' (CMS) Center 

for Consumer Information and Insurance Oversight (CClIO) which directs the PCIP 

program, announced in February 2013 that it was suspending enrollment in the 

17 These are: Alaska, Arkansas, California, Colorado, Connecticut, Illinois, Iowa, Kansas, Maine, 

Maryland, Michigan, Missouri, Montana, New Hampshire, New Jersey, New Mexico, New York, North 

Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Washington, and 

Wisconsin. See http://www.pcip.gov/StatePlans.htmlfor more information on state-run PCIPs. 

18 J. P. Hall and J. M. Moore, Realizing Health Reform's Potential: Enrollment, Costs, 2012. 

19 J. P. Hall and J. M. Moore, Realizing Health Reform's Potential: Pre-Existing Condition Insurance 

Pions Created by the Affordable Care Act of2010 (New York: The Commonwealth Fund, Oct. 2010). 

20 J. P. Hall and J. M. Moore, Realizing Health Reform's Potential: Enrollment, Costs, 2012. 

21 These are: Alabama, Arizona, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, 

Indiana, Kentucky, louisiana, Massachusetts, Minnesota, Mississippi, Nebraska, Nevada, North Dakota, 

South Carolina, Tennessee, Texas, Vermont, Virginia, West Virginia, and Wyoming. See 

http:Uwww.pcip.gov/StatePlans.htmlfor more information about the federal PCIP. 

12 
58 


80809.045

program. 22 In addition, CMS consolidated the number of plan options into one through 

the end of 2013, i.e., the remainder of the program's life. The plan i~cludes a $2,000 

deductible for in-network medical services and a $500 deductible for formulary 

prescription drugs. The agency also reduced the amount the plan will pay after an 

enrollee reaches the deductible from 80 percent of allowable charges to 70 percent and 

increased coinsurance to 30 percent from 20 percent. The maximum out-of-pocket limit 

for in-network services is $6,250 for in-network services and $10,000 for out-of-network 

services. CMS is also urging, though not requiring, states to determine the feasibility of 

changing their current PClP benefits to the federal standard, in order to ensure the 

viability of the program through the end of the year. 

Why the PCIP Program Experienced Lower-than-Expected Enrollment and High Costs 

The PClP program was expected to cover between 175,000 and 400,000 people over its 

three-and-a-half years of operation. 23 Based on an analysis of the Medicaid Expenditure 

Panel Survey (MEPS), the CMS Office of the Actuary in April 2010 estimated that the 

program would cover 375,000 people and exhaust its $5 billion in funding by 2012. 24 

Instead, the program has provided coverage to about 135,000 people over its lifetime, 

though enrollment has grown steadily over time. Applications for enrollment climbed by 

an average of 10,000 per month over the period July 2012 to October 2012, an increase 

of 30 percent from the same period a year earlier. 25 By January 2013, average monthly 

enrollment in the PCIP program nationwide exceeded 100,000. 

Driven by high per-enrollee claims costs, monthly program costs also have 

climbed: between May 2012 and October 2012, combined federal and state 

expenditures averaged $160 million per month. 26 The average claims cost per enrollee 

was $32,108 in 2012, but an analysis of program claims over a one-year period found 

22 Centers for Medicare and Medicaid Services, Center for Consumer Information and Insurance 

Oversight, "Announcement of PCIP Program Enrollment Suspension and Benefit Adjustment Analysis," 

Letter from Richard Popper, Director, Insurance Programs Group, to Pre-Existing Insurance Plan 

Contractors, Feb. 15, 2013. 

23 Hall and Moore, Realizing Health Reform'S Potential: Created by the Affordable Care Act, 2010; 

Department of Health and Human Services, "Pre-existing Condition Insurance Plan Program," Interim Final 

Rule, July 30,2010, available at http://edocket.access.gpo.gov/201O/pdf/201O-18691.pdf; and 

Congressional Budget Office, Letter to the Honorable Michael B. Enzi, June 21, 2010. 

24 R. S. Foster, "Estimated Financial Effects of the Patient Protection and Affordable Care Act, as 

Amended," Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. 

25 Centers for Medicare and Medicaid Services, Center for Consumer Information and Insurance 

Oversight, Cavering People with Preexisting Conditions: Report on the Implementation and Operation of 

the Pre-Existing Condition Insurance Plan Program, Jan. 31, 2013. 

26 Ibid. 

13 
59 


80809.046

that claims have been concentrated in a small number of enrollees: just 4.4 percent of 

PClP enrollees accounted for more than half of claims paid. There are several features of 

the PClP program that have contributed to both low enrollment and high per-enrollee 

claims costs. 

Low Enrollment in the PCIP Program 

The intended purpose of the PCIP program was to provide coverage to people who were 

uninsured and unable to gain coverage because of a preexisting health condition. An 

analysis of the MEPS by Mark Merlis found that in 2007 there were an estimated 6.9 

million people in the United States who had been uninsured for six months and who had 

a high-cost health condition.27 Merlis defined a high-cost health condition as one that 

would result in claims costs greater than 50 percent of the average for their age group, 

and which would likely make it nearly impossible for someone to gain coverage for their 

condition in most state individual insurance markets. 

With such a large population of people potentially eligible for the PClP program, 

why has enrollment been so low? The primary reason, as Hall and Moore have pointed 

out in their work, are unaffordable premiums. The Merlis analysis shows that of the 6.9 

million people who had been uninsured for six months with a high-cost health condition, 

79 percent were in households with incomes under 400 percent of the federal poverty 

level, or about $46,000 for a single person in 2013. A full one-quarter had incomes 

under poverty ($11,490 for a single person), an additional quarter had incomes between 

100 percent and 200 percent of poverty ($22,980 for a single person), and 29 percent 

had incomes between 200 percent and 400 percent of poverty. 

The PCIP program has made premiums more affordable than they otherwise 

would be for people compared with purchasing coverage in the individual market, or 

enrolling in most state high-risk pools. Rates are set to the average of a healthy person 

in the individual market as opposed to 100 percent-250 percent of that rate in state 

high-risk pools. Still, because the vast majority of the target population has low or 

moderate incomes, even these premiums can account for a substantial share of 

someone's income. For example, in the Texas PClP program, the premium for a plan 

with a $2,500 deductible was $318 per month in 2012, or $3,816 for 12 months. For a 

person in Texas with an income of $11,500, or about 100 percent of poverty, the 

27 M. Merlis, Health Coverage for the High-Risk Uninsured: Policy Options for Design of the Temporary 

High-Risk Pool (Washington, D.C.: National Institute for Health Care Reform, May 2010), available at 

http://www.nihcr.org/High-RiskPools#Table2. 

14 
60 


80809.047

premium would comprise one-third of his income and the deductible, 22 percent of his 

income. Thus, even prior to out-of-pocket spending on coinsurance above the 

deductible, he would spend more than half of his annual income on premiums and outof-pocket costs under the program. 

In addition to high costs relative to income, the program's requirement that 

someone be uninsured for six months also likely contributed to lower enrollment. 

People may have moved from high-cost, low-benefit coverage in both the individual 

market and the state high-risk pools in the absence of the restriction. In addition, people 

transitioning from exhausted benefits under COBRA following a long period of 

unemployment may have enrolled in the PCIP program if not for this restriction. 

High Costs in the PCIP Program 

Like the existing state high-risk pools, premiums in the PCIP program have run well short 

of claims costs. Indeed, the purpose of the program was to provide a temporary source 

of funding, $5 billion, to fill the gap between premiums and claims costs for people with 

uninsurable health problems through the end of 2013. As discussed above, state highrisk pools also rely on alternative sources of funding, including assessments on 

insurance carriers, state general revenues, and federal grants. But as Hall and Moore 

demonstrate, claims costs in the PCIP program have been even higher than those in the 

state high-risk pools relative to premium revenues. 28 

Medical loss ratios (MLRs) are a measure of claims costs to overall premium 

revenues. Under the Affordable Care Act, insurance carriers are now required to spend 

at least 80 percent and 85 percent of their premiums on medical costs and quality 

improvement, as opposed to nonmedical expenses including administrative costs and 

profits. But insurance plans are unsustainable if medical costs exceed premiums. Hall 

and Moore find that MLRs in both state high-risk pools and the PCIP program exceed 

100 percent, but that those of the PClPs are as much as seven times those of high-risk 

pools in some states, even after adjusting for the higher premiums paid by people 

enrolled in the high-risk pools (Exhibit 2). 

28 Hall and Moore, Realizing Health Reform's Potential: Enrollment, Costs, 2012. 

15 
61 


80809.048

Exhibit 2. Medical Loss Ratios (MLRs) of State PCIP and High-Risk Pool 

(HRP) Programs 

Medical loss ratios (MLRs) of PCIP and state high-risk pool (HRP) programs 

1400% 

1200% 

1000% 

800% 

600% 

400% 

200% 

0% 

III FCIP OAdjusted state HRP* 

~~~~~~~~~~~~$~~~&~~#~ 'If' «0 <" Most state HRP premiums are higher than standard risk rates, therefore MlR is adjusted to reflect premiums priced 

at standard risk rate. 

Notes: Ohio does not have a state high-risk pool. The federal bar shoW'S the MLR for all of the PCIP programs that 

were federally administered in;::3 states and D,C. California does not use a standard risk rate, 

Source: J. P. Hall and J. M. Moore, Reali=jng Health F?eform's Potential-TheAffordab/e Call~Act's Pre-Existing 

Condition insurance Plan,· Enrollment. Costs. and Lessons for Refonn The Comlllo!1\.¥ealth Fund. Sept. 201::. 

Why have claims costs run so far ahead of those in state high-risk pools? First, as 

Hall and Moore point out, unlike nearly all state high-risk pools, the PCIP program 

imposed no waiting periods for coverage of preexisting health conditions for people 

who became eligible for program enrollment. This requirement combined with the fact 

that people must be uninsured for six months likely has led to an overrepresentation of 

people in the PClP program with serious health problems that have gone untreated for a 

long period of time. 

CMS's analysis of the federal PClP program found that the top four diagnoses or 

treatments included cancers, ischemic heart disease, degenerative bone diseases, and 

follow-up medical care required after major surgery or cancer treatments. 29 These four 

diagnoses comprised more than one-third (36%) of claims costs in the federal program 

in 2012. Nearly 5,000 enrollees had ischemic heart disease, among the most costly 

conditions to treat, and nearly 700 of those patients had heart failure. Also in that year, 

2,200 enrollees had cancer, and nearly 1,000 of those were women with a diagnosis of 

29 Centers for Medicare and Medicaid Services, Center for Consumer Information and Insurance 

Oversight, Jan. 2013. 

16 
62 


80809.049

breast cancer. CMS points out that all of these conditions involved care in hospitals and 

other facilities. Indeed in 2012, 57 percent of claims paid in the federally administered 

program were for care provided in a hospital or other facility on an inpatient or 

outpatient basis. 

Hall and Moore's analysis of the state and federal PClP program also finds 

evidence of a higher disease burden among PCIP enrollees compared with people 

enrolled in state high-risk pools. Per member per month costs in the PClP program are 

nearly nine times those in the state high-risk pools. In an earlier analysis of claims in 10 

state programs, Hall and Moore found higher-than-average enrollment among young 

adults with serious health problems including epilepsy, cancer, lupus, rheumatoid 

arthritis, and hemophilia, as well as young women with high-risk pregnancies. 3o They 

also found above average enrollment among older adults ages 58-62 and a 

concentration of diagnoses similar to that of the CMS analysis: cancer, ischemic heart 

disease, degenerative bone disease, and diabetes. 

CMS has pursued a number of strategies to control costs in the PCIP program. 31 

They include: 

• Changing provider networks used in the federal program and decreasing both its 

negotiated and out-of-network provider payment rates. 

• Negotiating additional discounts for reimbursement rates for hospitals that 

serve large numbers of PCIP enrollees. 

• Requiring covered specialty drugs to be dispensed only by the lowest-cost 

pharmacies and providers. 

• Consolidating health plan options into one, with higher cost-sharing by 

enrollees, as described above. 

• Conducting clinical and nonclinical audits of all federal and state programs. To 

be completed by the end of 2014, the audits are focusing on program 

enrollment and disenrollment, premium billing, eligibility and benefit coverage, 

appeals, finances of the risk pool, and medical and pharmaceutical claims 

payments and payment safeguards. 

30 J. P. Hall and J. Moore, Realizing Health Refarm's Potential-Early Implementation of Pre-Existing 

Condition Insurance Plans: Providing on Interim Safety Net for the Uninsurable (New York: The 

Commonwealth Fund, June 2011). 

31 Centers for Medicare and Medicaid Services, Center for Consumer Information and Insurance 

Oversight, Jan. 2013. 

17 
63 


80809.050

High-Risk Pools Are Not a Long-Term Solution for Expanding Health Insurance 

Coverage 

The experiences of both the PCIP program and the state high-risk pools demonstrate the 

profound inefficiency of segmenting insurance risk pools. Without the benefit of a broad 

and diverse group of insured people, both programs operate at a considerable loss and 

depend on federal and state financing to fund the enormous gap between premiums 

and claims costs. Still, because of the high premium costs, particularly relative to the 

modest incomes of the target population of uninsured people with chronic health 

problems, both programs suffer from low enrollment. The PCIP program is covering only 

about 2 percent of the likely eligible population of people with a high-cost condition 

who had been uninsured for six months. 

The experience of both programs also underscores why high-risk pools are not 

long-term solutions for expanding health insurance. Indeed, analyses of proposals to 

achieve near-universal coverage that have included high-risk pools as a central feature 

have found that they would cover few people at exorbitant cost. In 2008, Senator John 

McCain proposed as a presidential candidate a plan for universal coverage that would 

have ended the personal income tax exemption for employer-provided health benefits 

and replaced it with tax credits for purchasing insurance in the individual market. The 

proposal did not change insurance market rules, allowing carriers to continue to rate 

premiums on the basis of health and gender and deny coverage or exclude benefits 

based on preexisting conditions. Indeed, Sen. McCain's proposal would likely have 

undermined state efforts to ban such practices by allowing the sale of health insurance 

across state lines. People with preexisting health conditions who were not able to find 

coverage in the individual insurance market would have been able to gain coverage 

through high-risk pools. States could join with other states to enlarge existing high-risk 

pools. The pools would have received federal financial support and people with low 

incomes would have been eligible for premium assistance. 

The Urban Institute and Brookings Institution Tax Policy Center estimated that 

over the 10-year period 2009 to 2018, the total federal cost of McCain's plan could 

reach $1.3 trillion, but only reduce the number of uninsured people by up to 4.6 

million. 32 But the Center's estimates for the McCain proposal did not include the effects 

of his proposed high-risk pools, which would cover people who cannot find coverage in 

the individual market. Two features of the McCain proposal increased the likelihood 

32 L. Burman, S. Khitatrakun, G. Leiserson et aI., An Updated Analysis o/the 2008 Presidential 

Candidates' Tax Plans (Washington, D.C.: Urban Institute and Brookings Institution, Sept. 12, 2008). 

18 
64 


80809.051

that millions of people would likely seek coverage through the high-risk pools. Allowing 

people to buy coverage across state lines would have weakened existing consumer 

protections in the states that require guaranteed issue and community rating, leaving 

many people who currently have coverage through those markets to go to the high-risk 

pools. The Center and Buchmueller et al. also estimated that as many as 20 million 

people might lose employer coverage as a result of the elimination of the employer 

benefit tax exemption, leading many with health problems to seek coverage in high-risk 

pools.33 The Center estimated that Sen. McCain's high-risk pools, if they were financed 

adequately and coverage was made affordable as he proposed, might have added an 

additional $1 trillion to the cost of his plan over 10 years. 

The Affordable Care Act Is a Long-Term solution to Achieving Near-Universal Coverage 

The enactment of the Affordable Care Act three years ago placed the United States on a 

path to near-universal health insurance coverage. More than 100,000 people who were 

uninsurable in most state individual insurance markets because of a preexisting health 

problem gained coverage through the PClP program. Millions of young adults have 

gained or maintained insurance through their parents' plans. And the laws early 

insurance regulations that banned carriers from placing limits on what they will pay and 

from retroactively cancelling health policies when someone becomes ill, have already 

improved the reliability of health insurance for millions of Americans who must buy 

coverage on their own. 

But the limitations of these early reforms in reaching near-universal coverage 

underscore the imperative for federal and state policymakers to complete the rollout of 

the law's central coverage provisions, scheduled to go into effect in January of next 

year. These provisions include an expansion in income eligibility for Medicaid for people 

in families with incomes up to 133 percent of poverty ($15,282 for an individual and 

$31,322 for a family of four). Comprehensive insurance plans will be available through 

new health insurance marketplaces in every state with tax credits available to people 

with incomes up to 400 percent of poverty ($45,960 for an individual and $94,200 for a 

family of four) to help pay for premiums (Exhibit 3). Carriers selling plans in the new 

marketplaces, as well as in the individual and small-group markets, are required to 

provide an "essential health benefit" package, similar to plans provided by employers. 

Insurers must offer these benefits at four tiers of cost coverage: bronze plans (covering 

33 T. C. Buchmueller, S. A. Glied, A. Royalty et aI., "Cost and Coverage: Implications of the McCain Plan 

to Restructure Health Insurance," Health Affairs Web Exclusive {Sept. 16, 200B):w472-w4B1. 

19 
65 


80809.052

on average 60% of someone's annual medical costs), silver (70% of costs), gold (80% of 

costs), or platinum (90% of costs). For people with low incomes, the average costs 

covered by the silver plan are increased to 94 percent (for those with incomes up to 

149% of poverty), 87 percent (150% to 199% of poverty), and 73 percent (200% to 249% 

of poverty). Out-of-pocket spending limits will also be lower for people with incomes 

under 400 percent of poverty. 

Exhibit 3. Premium Tax Credits and Cost-Sharing Protections 

Under the Affordable Care Act 

Federal Premium Out-of-pocket Actuarial value: Income contribution as a poverty level share of income limits Silver plan 

<133% $: <$15.282 2°/0. (or Medicaid) 94% F: <$31.322 

133%-149% $: $15.282- <17.235 3.0%-4.0% $: $1.933 94% F: $31.322 - <35.325 F: $3,967 

150%-199% $: $17.235 - <22.980 4.0%-6.3% 87% F: $35.325 - <47.100 

20011-/0-249% $: $22.980 - <28.725 6.3%-3.05% 73% F: $47.100 - <58.875 s: $2.975 

$: $28.725 - <34.470 F: $5.950 250%-299% F: $58.875 - <70.650 8.05%-9.5% 70% 

300%-399% $: $34.470 - <45.960 9.5% $: $3.967 70% F: $70.650 - <94.200 F: $7.933 

400%+ $: $45.960+ - $: $5.950 - F: $94.200+ F: $11.900 

Four levels of cost-sharing: 1st tier (Bronze) actuarial value: 60% Catastrophic policy with essential benefits 

2nd tier (Silver) actuarial value: 70% package available 10 young adults and people 

3rd tier (Gold) actuarial value: 80% Whose premiums are 8%+ of income 

4th tier (Platinum) actuarial value: 90% 

credits 

~~ ,--, 

are for silver 

"",".m plan. ~ om. ,~."' .,=,.,,,~ -",~.~. ,~. ,~,. '"' " ••.• , 8 TIE 

Source: Federa! poverty levels are for 2013; Commonwealth Fund Health Reform Resourte Center: What's in the t()MW:IfMEAl.TH 

A!fordable Care Acl? iPL '111-148 and 111-152). I1ttp:IIw.w,.commonwealthfund.orgiHeafih-RefonniHealth-Reform- ,,, •• 

Resource.asp;.,. 

These new subsidized insurance options are complemented by a set of sweeping 

new insurance market reforms. The reforms include: requiring insurers to offer an 

essential health benefit package similar that offered in employer plans; banning insurers 

from charging people higher premiums based on health or gender;.limiting what older 

people may be charged relative to younger people by a factor of 3:1; banning carriers 

from limiting or denying benefits because of preexisting health conditions; and requiring 

broad pooling of risk in state insurance markets to further reduce the ability of carriers 

to maintain higher rates on older or sicker enrollees. 

20 
66 


80809.053

Older Adults with Health Problems with Low and Moderate Incomes Will Face Far 

Lower Premiums in 2014 for Plans Offered Through the Marketplaces Compared with 

the PCIP Program 

While the Affordable Care Act's insurance market reforms will finally make it possible 

for people with even minor health problems or who are older to purchase a health plan 

with a comprehensive benefit package at the same premium rate as a healthier person, 

the considerable subsidies will, also for the first time, level the playing field between the 

individual market and employer coverage for people with incomes under 400 percent of 

poverty. Under the reform law, taxpayers with incomes between 100 percent and 400 

percent of poverty who do not have an affordable offer of health insurance through 

their jobs and are not eligible for Medicaid, will be eligible for insurance premium tax 

credits for private plans sold through the marketplaces. Over that income range, people 

eligible for the tax credits would contribute no more than 2 percent to 9.5 percent of 

their income toward their premium. The amount of the credit will be equal to the 

difference between someone's required premium contribution and the premium of the 

benchmark health plan-the second-lowest-cost "silver plan" offered through the 

marketplaces. 34 This means that someone may choose a plan that is not the benchmark 

plan, but the amount of the tax credit will be determined based on the premium for the 

benchmark plan, not the plan they enroll in, which could be less or more than the 

benchmark. In addition, the tax credit amount cannot exceed the amount of the full 

premium. 

To illustrate, a 50-year-old man with an income of $23,011 would be at 200 

percent of the poverty level in 2014 (Exhibit 4). His required premium contribution 

would be 6.3 percent of his income, or $1,450. The Kaiser Family Foundation estimates 

that his premium for a benchmark plan in a medium-cost area of the country would be 

about $6,978. The man's tax credit would thus be equal to the benchmark premium 

minus his required contribution, or $5,529. If he were 60, he would be charged a higher 

premium in the marketplaces. But the tax credit would also be higher, since his 

premium contribution is a fixed share of his income. At 200 percent of poverty, the 50-

year-old man would also have an out-of-pocket limit of $2,975. His plan, which would 

include the essential health benefit package, would cover on average 73 percent of his 

medical costs during the year (Exhibit 3). 

34 S. R. Collins, "Proposed Rule on Premium Tax Credits: Who's Eligible and How Much Will They 

Help?" The Commonwealth Fund Blog, Aug 2011. 

21 
67 


80809.054

Exhibit 4. Annual Premium Amount and Tax Credits 

for an Individual Plan Under the Affordable Care Act, 2014 

Annual premium amount paid by policy holder and premium tax credit 

$8,000 Premium tax credit 

• Required premium payment by policy holder Fulipremlum=$U78 

$1,000 

$6,000 

$5,000 

$4,000 

$3,000 

$2,000 

$1,000 

$0 

---~------r-", I------:-r'.-- I .,. 

I I I ! I I' I, 

[

' I I i I I I I 1 i 

1

6148 164551 ,62881 • I ' 

I I! i 

, 

i i ! i 

Conm- I iContri-; iC()ntrl~ 

J

bUtiOn i (bution i i~:iO:d at 

capP,',d,atj :cappedat i 14:: f I 2.0% of ~~.3"k of III. f I~co~e .. ",[I ineol'fl& "Income 

100% FPL 138% FPL 

$11,505 $15,871 

150% FPL 

$11,258 

200% FPL 

$23,011 

-,.--,------,...--,--

250% FP L 300% FPL 

$22,763 $34,516 

400% FPL 

$46,021 

Notes: For single policy holder age 50, in a medium..cost area in 2014, Premium estimates are based on an 

actuarial value of 0.70, Actuarial value is the average percent of medical costs covered by a health plan. FPl refers 

to federal poverty level. 

Source: Premium estimates are from Kaiser Family Foundation Health Reform Subsidy Calculator 

http://healthreform,hff.ol'g!Subsidvcakuiator.aspx. 

at 

In contrast, annual premiums for 50-year-olds at this income level in the PCIP 

program are far higher in every state (Exhibit 5). Depending on the state that he lives in, 

the 50-year-old man in the example would face a premium for a PCIP plan that would 

exceed his contribution for a private plan offered through the marketplaces in 2014 by 

nearly two times in Virginia, which has the lowest PCIP premiums, to more than 10 

times in Alaska, the state with the highest premiums. 

22 
68 


80809.055

Exhibit 5. PCIP Annual Premiums by State vs. National Average 

Premium Contributions for Plans Offered Through Exchanges 

PCIP annual premiums for 50-year-olds 

$11.000 

$10,000 

$9,000 

$8.000 

$7.000 

$5,000 

o Federally administered PCIf' III State administered PCIP 

Annual enrollee premium contributions for privare 

plans offered through state exchanges In 2014 

400% FPL: $4.372 

300% FPL: $3.279 

250% FPL: $2.315 

- - - 200% FPL: $1.450 

- 138% FPL: $523 

$14.580 

:::~m~ 11 ~ n I I 

$ 4Z~NW~>XJ?~~Zc~woOZXUJU~WOO4~UI~~WO~~044~~~OC~Xoo~w~~ >~~«o~z ~~~a-~~Z-Z~r~-QO~~~>ZO~U~~ZU~-~~4~ zzmuo~s« 

Notes: The annual premium is a monthly rate multiplied by 1 ::!.In all cases It represents Ihe median cost plan 01 an average. 

The enrollee premium contribulion levels are for a single policy holder age 50.11'1 a mewumMcost area In ;;014 {see Exhlb!14}. 

Source: J. P. Hall and J, r,iI. Moore. Real)"ling Health Reform's Potenria!: Tht:' Affo/"r:labk? Ca/'eoAct's Pre~Exist{ng Condition 

Insurance Pian' Enrollment. Costs. and Lessons for Reform. The Commonwealth Fund. Sept. 2012: Commonwt>:alth Fund 

anatysls. March 2013. 

Conclusion and Policy implications 

The Pre-Existing Condition Insurance Plan Program has succeeded in offering 

transitional support for thousands of people who would otherwise be uninsurable in the 

individual insurance market. The 50-state program provided more affordable coverage 

than people could gain through most existing state high-risk pools, which operate in 

only 35 states. And it offered immediate coverage of preexisting conditions for people 

with serious health problems. 

The program's low enrollment relative to the millions of uninsured Americans 

with serious chronic health problems reflects the program's lack of premium subsidies. 

This means that its potential benefits are out of reach for the vast majority of this 

popUlation: 79 percent of the estimated 6.9 million people with a high-cost health 

problem who have been uninsured for at least six months have annual incomes of less 

than 400 percent of poverty; half have incomes of less than 200 percent of poverty. 

The PCIP program's high costs relative to premiums reflect its intended purpose 

of providing immediate coverage of people with health problems. In this way, the 

program fulfilled its Congressional mandate and also made it a more costly program 

than even the existing state high-risk pools. 

23 
69 


80809.056

Federal and state policymakers can address the program's shortcomings in 

enrollment and costs by allowing its enrollees to transition to the new state insurance 

marketplaces and the expanded Medicaid program in January 2014, as Congress 

intended. All state high-risk pools are also likely to end operation in January. Enrollees 

from both programs will join an estimated 7 million new enrollees in the marketplaces 

next year, with a diverse age and health profile, which will help spread the costs of care 

across a much broader risk pool. Twenty-seven million people are expected to gain 

coverage through the marketplaces by 2018. The Congressional Budget Office estimates 

that the influx of younger and healthy people into the marketplaces and the individual 

market will lower premiums by 7 percent to 10 percent below what they are today in 

the individual market for an equivalent benefit package. 35 In addition, the CBO 

estimates that economies of scale and lower administrative costs from bans on 

underwriting will lower premium costs by an additional 7 percent to 10 percent under 

full implementation. A substantial nationwide reinsurance program that will go into 

effect next year will protect state marketplaces that experience a disproportionately 

large influx of high-cost enrollees. 

One of the central goals of the Affordable Care Act is to pool risk in insurance 

markets far more broadly than is the case today in the United States. Extensive 

segmentation of risk in insurance markets has fueled growth in the number of uninsured 

Americans over the past several decades and has made the U.S. the industrialized 

world's unequivocal leader in the cost of insurance administration. 36 The experience of 

both the PClP program and the state high-risk pools over their 40-year history 

underscores why a shared responsibility for health care costs across the population and 

the life cycle is essential for an equitable and efficiently run health insurance system. 

Thank you. 

35 D. W. Elmendorf, Letter to the Honorable Evan Bayh (Washington, D.C.: Congressional Budget 

Office, Nov. 30, 2009). 

36 The Commonwealth Fund Commission on a High Performance Health System, Why Not the Best? 

Results from the National Scorecard on U.S. Health System Performance, 2011 (New York: The 

Commonwealth Fund, Oct. 20ll). 

24 
70 

Mr. PITTS. The Chair thanks the gentlelady. 

Mr. Pollack, you are recognized for 5 minutes for an opening 

statement. 

STATEMENT OF RON POLLACK 

Mr. POLLACK. Thank you, Chairman Pitts. Thanks for your graciousness in hosting this hearing, and thank you, Mr. Vice Chairman, Dr. Burgess, for this hearing. 

Preexisting conditions obviously are a very important matter 

with respect to what we should do for the large number of people 

who are affected by it. I took a look at the statistics for Texas and 

Pennsylvania to get a sense of how many people have preexisting 

health conditions. I looked at the totality of them. So in Pennsylvania, more than one out of four people from birth through 64 have 

a preexisting health condition. In Texas, it is 22.5 percent. Obviously, the older you get, those between 45 and 64, in Pennsylvania, 

it is 48 percent; in Texas, it is 46.4 percent. 

Now, we are obviously not talking about all these people in this 

hearing, and that is because most of them get protection because 

they have employer-sponsored insurance, and we think that is 

good. So what do we do with respect to employer-sponsored insurance and what can we learn from that? 

Well, in employer-sponsored insurance, we do not deny coverage 

to people because they have a preexisting condition, and we think 

that is good. Employers don’t typically ask new employees, do you 

have diabetes, do you have a history of cancer, do you have heart 

problems, and they don’t charge discriminatory premiums based on 

health status, and we think that is good. We don’t deny coverage 

for clinical care that may relate to one’s preexisting condition, and 

we think that is good. We don’t charge a prospective woman employee a higher premium because she is more likely to be pregnant 

than one of her male colleagues, and we think that is good. We 

don’t charge those of us who have a few gray hairs a whole lot 

more in terms of premiums because of our age, and we think that 

is good. And for workers who have difficulty paying for premiums, 

say, a middle-class worker who might be getting a salary of 

$60,000 and yet family health coverage now averages over $15,000, 

one-fourth, we provide them with help. Employers provide and pay 

for a substantial part of the premiums, and we think that is good. 

Well, as more and more people lose employer-sponsored insurance, either because employers are finding it too expensive or more 

employees are going into part-time work or functioning as contractors, I think there is a lot we can learn from that, and the Affordable Care Act helps us do that because in the individual marketplace, what the Affordable Care Act will say just like we do with 

employer-sponsored insurance, you are not to deny coverage due to 

a preexisting condition. You are not to charge a discriminatory premium because of your health status. You are not supposed to deny 

clinical care to somebody that fits with their health care problems. 

We will not charge women a discriminatory premium. We are going 

to limit the differential in what is paid and what people who are 

older have to pay as premiums compared to younger people. And 

we provide premium support for those below 400 percent of poverty. And by the way, with respect to premium support, in PennsylVerDate Nov 24 2008 16:02 Jan 14, 2014 Jkt 037690 PO 00000 Frm 00076 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-24 CHRIS
71 

vania there will be 896,000 people eligible for premium support 

come January 1. In Texas, it will be 2.6 million people. 

The point of all this is that the Affordable Care Act creates systemic change starting January 1 that is truly responsive to the 

needs of those people who have preexisting conditions, and while 

we support changes that would enable those people who right now 

during this transition period cannot get into the PCIP program, 

that should not be done by undermining the more permanent 

changes that should be made and will be made under the Affordable Care Act. 

Ms. Zurface talked about two different changes in her testimony, 

about there no longer being a 6-month wait and the need for premium assistance. We agree with her. Of course, those things would 

occur starting January 1. So our hope is that there will be clear 

recognition that come January 1, we have a much better way to 

deal with those folks who have got preexisting conditions and it 

will work in a way that is truly helpful to them. 

[The prepared statement of Mr. Pollack follows:] 

72 


80809.057

"Protecting America's Sick and Chronically III" 

House Committee on Energy and Commerce 

Subcommittee on Health 

Written Statement for the Record by 

Ron Pollack, Executive Director, Families USA 

Wednesday, April 3, 2013 

Mr. Chairman and Members of the Committee: 

Thank you for inviting Families USA to testify today at this very important hearing about how best to 

protect Americans who have a pre-existing health condition. Since 1982, Families USA has worked to 

promote high-quality, affordable health care for all Americans. We are pleased to be invited to testify 

about how the Affordable Care Act will offer concrete help to the millions of people who are sick or who 

have a chronic condition that could lead them to be denied coverage by a health insurance company. 

A Pervasive Problem 

Last year, Families USA commissioned The Lewin Group to quantify the number of Americans who have 

been diagnosed with pre-existing health conditions. looking only at those serious conditions that are 

commonly linked to coverage denials, we found that more than 64.8 million non-elderly Americans have 

been diagnosed with pre-existing conditions that could lead to denials of coverage if the Affordable Care 

Act did not exist. This means that one in every four non-elderly Americans (24.9 percent) would be at 

risk of being denied coverage today without the health care law. 

No group is immune to the effects of this pervasive problem. People across the states, young and old, 

black and white, rich and poor, all have a great deal to gain from the Affordable Care Act's protections 

against discrimination based on pre-existing conditions. We found that one in five young adults aged 18 

to 24 has a pre-existing condition that could lead to a denial of coverage, while nearly half of adults aged 

55 to 64 have a pre-existing condition. Americans at every income level have a similar likelihood of 

having a pre-existing condition that could lead to a denial of coverage. We also discovered that 28.3 

1 
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percent of white, non-Hispanic Americans have a pre-existing condition, 24.1 percent of black, nonHispanic Americans have a pre-existing condition, and 18.1 percent of Hispanic Americans have a preexisting condition. 

Our analysis captures only those who have already been diagnosed with pre-existing conditions, 

focusing solely on those conditions that frequently result in denials of coverage. Our data depicts only 

those people who were diagnosed or treated for one or more of a list of pre-existing conditions within 

the year 2009. 

The Affordable Care Act: A Permanent Solution 

Millions of Americans have already been diagnosed with conditions such as diabetes, heart disease, and 

cancer. Millions more will develop such conditions over the course of their lives. Each of these people 

will be helped by the health care law's protections against discrimination based on pre-existing 

conditions. 

Under the Affordable Care Act, insurers are no longer able to deny coverage to children because of preexisting conditions, nor are they allowed to exclude care for kids with pre-existing conditions. Beginning 

in 2014, no American, regardless of age, can be denied coverage. Equally important, starting in 2014, 

insurers will no longer be allowed to charge higher premiums based on health status or sell policies that 

exclude coverage for certain benefits based on a person's pre-existing condition. The health care law 

also created a temporary bridge program, the Pre-Existing Condition Insurance Plan (PClP), to help 

people who have been denied coverage by an insurance company due to a pre-existing condition obtain 

health coverage until the law goes fully into effect in 2014. The PCIP will be discussed later in this 

testimony. 

Before the passage of the Affordable Care Act, insurers were generally free to treat individuals with preexisting conditions unfairly. In most states, insurers have been able to refuse to sell individuals policies 

for a variety of reasons, including their medical history, health status, and health risks. The 

consequences of such denials can be dire. 

2 
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Frequently, uninsured people are forced to delay or go without care due to the high cost of health 

services. According to the Kaiser Family Foundation, uninsured adults are more than six times as likely as 

those with private insurance to go without needed care due to cost (26 percent versus 4 percent).' And 

uninsured adults are nearly four times more likely than insured adults to delay or forgo getting a 

preventive care screening, such as a cancer screening, due to cost (36 percent versus 10 percent).' 

Only when a condition becomes so serious that treatment can no longer be put off do the uninsured 

seek care. Quite often, people who are uninsured suffer devastating financial consequences as a result 

of paying for this care. Uninsured patients are unable to negotiate the same discounts on hospital and 

doctor charges that insurance companies do. As a result, uninsured patients are often charged more 

than 2.5 times what insured patients are charged for hospital services.' Uninsured people often suffer 

financial catastrophe because of medical bills. In 2007, illness or medical bills were contributing factors 

in nearly two-thirds of all personal bankruptcies filed.' 

In addition, the fear of going without health coverage negatively affects productivity and the labor 

market because many Americans make decisions about what job to choose, or whether to stay in a job, 

based on whether the job provides health coverage - a phenomenon known as "job lock." 

The Pre-Existing Condition Insurance Pool: A Bridge to a Permanent Solution 

The Affordable Care Act created a new, temporary program that allows uninsured adults with preexisting conditions to buy health coverage in state-based insurance pools. Congress appropriated $5 

billion for the Pre-Existing Condition Insurance Plan (PClP), and it allowed states to choose to operate 

the pools on their own or to defer to the federal government to operate the plan. The PCIP was 

1 Kaiser Family foundation, How Private Health Coverage Works: A Primer, Key Facts about Americans without 

Health Insurance (Washington: Kaiser Family Foundation, October 2011). 

'Sara R. Collins, Michelle M. Doty, Ruth Robertson, and Tracy Garber, Help on the Horizon: How the Recession Has 

Left Millions of Workers without Health Insurance, and How Health Reform Will Bring Relief (New York: The 

Commonwealth Fund, March 2011). 

3 Gerard Anderson, "From 'Soak the Rich' to 'Soak the Poor': Recent Trends in Hospital Pricing," Health Affairs 26, 

nO.3 (May/June 2007): 780-789. 

4 David U. Himmelstein, Deborah Thorne, Elizabeth Warren, and Steffie Woolhandler, "Medical Bankruptcy in the 

United States, 2007: Results of a National Study," The American Journal of Medicine 122, no. 8 (June 2008): 741-

746. 

3 
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designed to serve as a short-term "bridge" program for consumers with pre-existing conditions whose 

insurance companies had denied them coverage. Congress intended for the plan to act as a stop-gap 

measure to help consumers until 2014, when the Affordable Care Act's new rules will kick in to protect 

sick people from being denied health coverage. 

The Department of Health and Human Services recently announced that the Pre-Existing Condition 

Insurance Plan will no longer accept new applications for services. The 100,000 individuals nationwide 

who are currently enrolled in the PCIP will continue to be served. Most of the enrollees in the plan have 

serious and expensive conditions. Because the program has limited funding, the Department of Health 

and Human Services made the decision to suspend enrollment to ensure that the program would 

continue to have the money it needs to keep people who are currently enrolled covered until the new 

health insurance rules go into effect in 2014. 

The PCIP was never expected to permanently solve the problem of providing health care to sick 

individuals who had been denied coverage by insurance companies. The short-comings of high-risk 

pools, such as the PCIP, were well-known even before the passage of the Affordable Care Act. Numerous 

states operated high-risk pools with their own funding (and in some cases, with a small amount of 

federal funding), before the creation ofthe PClP. Those pools have suffered from very low enrollment 

and very high costs. States have discovered that high-risk pools are prohibitively expensive to operate. 

Therefore, they keep enrollment low and charge consumers very steep premiums. Health economists 

agree that it is far better to include sicker, more expensive consumers in a larger insurance pool that 

includes healthier consumers in order to help spread and share the costs of care. That is why the 

ultimate solution for people with pre-existing conditions is to end the practice of insurance companies 

denying them coverage. 

The bottom line is this: thanks to the Affordable Care Act, millions of Americans who have a pre-existing 

condition will be helped by 2014 and can rest easier knowing that they cannot be discriminated against 

because of their health. 

4 
76 

Mr. PITTS. All right. The Chair thanks the gentleman for his 

opening statement and recognizes Mr. Miller for 5 minutes for your 

opening statement. 

STATEMENT OF THOMAS P. MILLER 

Mr. MILLER. Thank you, Chairman Pitts, Vice Chairman Burgess 

and members of the subcommittee for the opportunity to speak 

today on protecting America’s sick and chronically ill. 

Preexisting condition insurance plans, or PCIPs, represented a 

poorly designed, halfhearted gesture within the Affordable Care 

Act. It was aimed primarily at minimizing political risks rather 

than addressing a serious problem more immediately and comprehensively. PCIP coverage served more as a cosmetic match to 

cover the consequences of slow implementation of complex coverage 

provisions scheduled to begin nearly 4 years after enactment of the 

ACA. 

The program never received sufficient funding to do its job seriously. The relatively small amount of funding and limited attention 

to the program’s structural details appeared to conflict with the exaggerated rhetoric of the Obama Administration in claiming that 

the extensive problems of lack of coverage for tens of millions of 

Americans with preexisting health conditions were the primary political rationale for enacting the ACA’s regulatory coverage and financing provisions. 

The political ideology behind the core policies of the ACA to install guaranteed issue, community rating, mandated coverage, richer standard benefits and federal regulation of health insurance 

trumped targeting the smaller but significant problem of several 

million Americans with limited or no insurance coverage due to serious preexisting health conditions and addressing it more effectively. 

The PCIP program managed to solve less of the problem, enrolling fewer Americans than traditional State high-risk pools had enrolled but at a higher per-person cost while still running out of 

money. Pretty good for government work. At the same time, it discouraged continuation beyond 2013 of better tested State alternative mechanisms, the better-funded high-risk pools. By setting 

its premiums for all at no more than standard rates, contrary to 

the better practices of the older State high-risk pools, or HRPs, and 

also imposing a 6-month spell as uninsured to qualify for coverage, 

PCIP only succeeded in mostly enrolling very desperate high-cost 

individuals who had no other alternatives for coverage. 

Now, States administering pre-ACA HRPs did a better job by 

charging enrollees somewhat higher premiums, offering less comprehensive coverage and focusing on those individuals who presented the most serious and costly medical conditions. However, 

they too still need more robust sources of funding to do their job 

more thoroughly and effectively. But remember, simply trying to 

average or hide the same total health care claims costs across a 

somewhat wider base—that is the ACA approach—it may redistribute them but it doesn’t reduce those costs. If the forthcoming 

health exchanges are plagued by premium spikes, implementation 

misfires, limited enrollment and adverse selection, they may end 

up more closely resembling somewhat larger versions of State-level 

77 

PCIPS than more competitive alternatives to the current private 

insurance market. 

Policymakers should consider the following ten points. One, recognize that health care markets are local, not national. So too are 

problems for persons with high-cost conditions. Two, the rhetoric of 

delegating administration of sensitive health policy provisions to 

State governments needs to be matched by the reality of federal officials letting go of tight reins and trusting State officials with 

more discretion over eligibility, benefits and appeals issues, within 

much broader outcome-oriented federal parameters. Three, be very 

cautious about imprecise estimates, and they are often guesses, regarding the scale, scope and costs of the medically uninsurable and 

others with inadequate resources to handle very high-cost/high-risk 

health conditions. Four, we should commit a generous amount of 

a series of capped annual appropriations to support continued operations of state HRPs and/or restructured PCIPs, to be revisited 

upon subsequent evidence of larger enrollment demand or higher 

but medically necessary costs. Five, publicly subsidizing the highcost tail of health risks can strengthen the rest of the private 

health insurance market. Six, raise unsubsidized premiums 

charged for most enrollees in high-risk pool plans to at least 150 

percent of standard rates, but then provide income-based subsidies 

for lower-income people. Separate the issue of income support from 

that of protection against losing or lacking coverage solely due to 

elevated personal health risk. Seven, complementary policy reforms 

can help such as better portability from group to individual market 

provisions with creditable coverage, no requiring exhaustion of 

COBRA benefits, retargeting premium subsidies, and building information transparency mechanisms that reward better patient 

choices and provider practices. Eight, keep as many older state 

HRPs as possible in business after 2013, as an insurance policy 

against major problems in exchange implementation and individual 

mandate enforcement or compliance. Allowing such coverage to be 

considered qualified insurance under ACA would minimize post2013 disruptions in the continuity of coverage and care. Nine, if the 

overall costs of health care don’t rise more slowly, and individual 

incomes don’t rise more rapidly in the near future, no amount of 

subsidized insurance tinkering can keep up with the larger problem. Finally, the preexisting condition issue is still a largely limited, modest problem. Solve it instead of using it as a political excuse to politically hijack the rest of the private insurance market. 

Thank you. 

[The prepared statement of Mr. Miller follows:] 

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"Protecting America's Sick and Chronically Ill" 

House Committee on Energy and Commerce 

Subcommittee on Health 

Thomas P. Miller, J.D. 

Resident Fellow 

American Enterprise Institute 

April 3, 2013 
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Summary Points 

• Pre-existing condition insurance plans represented a poorly designed, half-hearted gesture 

within the ACA, aimed primarily at minimizing political risks rather than addressing a 

serious problem more immediately and comprehensively. The PCIP program never 

received sufficient funding to do its job seriously. 

• The political ideology behind the core policies of the ACA trumped targeting the smaller, 

but significant, problem of several million Americans with limited or no insurance 

coverage due to serious pre-existing health conditions and addressing it more effectively. 

• The PClP program managed to solve less of the problem (fewer enrollees), at a higher 

per-person cost, while still running out of money. At the same time, it discouraged 

continuation beyond 2013 of better, tested, state alternative mechanisms (better-funded 

high-risk pools). 

• Instead, we should commit a generous amount of a series of capped annual appropriations 

to support continued operations of state HRPs and/or restructured PClPs, to be revisited 

upon subsequent evidence oflarger enrollment demand or higher (but medically 

necessary) costs. Avoid early commitments to open-ended entitlement formulas 

• Keep as many older state HRPs as possible in business post-20l3, as an "insurance" 

policy against major problems in exchange implementation and individual mandate 

enforcement/compliance. Allow such coverage to be considered "qualified insurance" 

under ACA to minimize post-2013 disruptions in the continuity of coverage and care. 

• Remember that the pre-existing condition issue is still a largely limited, modest problem. 

Solve it, instead of using it as a political excuse to hijack the REST of the private 

insurance market. 
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Thank you Chainnan Pitts, Vice Chainnan Burgess, Ranking member Pallone, and 

members of the Subcommittee for the opportunity to speak this moming on protecting America's 

sick and chronically ill. 

I am speaking today as a health policy researcher, a resident fellow at the American 

Enterprise Institute (AEI) and author of several chapters on pre-existing health condition 

problems in books published by AEI and the Pioneer Institute, respectively. I also will draw 

upon previous experience as a senior health economist at the Joint Economic Committee, 

member of the National Advisory Council for the Agency for Healthcare Research and Quality, 

and health policy researcher at several other Washington-based think tanks. 

The subject of this hearing involves a limited, but chronic, problem whose condition was 

not improved, and arguable may have been worsened, by the Affordable Care Act (ACA). My 

testimony will highlight the various shortcomings of the Pre-existing Condition Insurance Plan 

(PCIP) components of the ACA; analyze the overall law's faulty diagnosis of the size, scope, and 

causes of coverage problems for Americans with high-risklhigh-cost health conditions; 

summarize what we should have learned; and propose some alternative policy reforms going 

forward. 

Better options have been limited, if not completely foreclosed, under current law, but that 

is no excuse for tolerating an unsatisfactory situation or making it worse. 

Basically, the PCIP provisions in the ACA were drafted as a politically cosmetic 

afterthought. They were poorly designed and underfunded, because they were seen as little more 
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than a temporary, tenuous bridge to a far grander political scheme for a radically reshaped set of 

health insurance arrangements (beginning in January 2014). 

pelP's Political History & Legislative Provisions 

For several decades before the ACA, a majority of states (eventually reaching 35 in the 

year before its enactment) instituted and administered state high-risk pools (HRPs) as important 

mechanisms to ensure access to health coverage for Americans facing potentially high-cost 

health conditions. In the 2008 presidential campaign, Senator John McCain proposed expansion 

of such state-run HRP coverage, with additional federal funding, as part of a broader reform of 

the health care system. His opponent, then-Senator Barack Obama, as well as other congressional 

Democrats, were rather disdainful of this approach during the campaign. The future president's 

health plan at that time made no room for separate high-risk pools. 

When the new Obama administration and its Capitol Hill allies began to develop their 

health care legislative plans in 2009, they relied instead on mandates and subsidies for private 

insurance - along with a substantial expansion of Medicaid - to move toward universal insurance 

coverage. The new health law would include an outright ban on insurers' excluding pre-existing 

conditions from coverage, and it would prohibit insurers' from requiring people with higher 

health risks to pay higher premiums (although older plan enrollees and smokers would still pay 

more than younger and tobacco-free ones in individual market plans; up to a point). 

Two cautionary considerations led to a limited revival of the high-risk pool approach 

during the later stages of the ACA's development. The ACA's reliance on an individual mandate 

on all Americans to purchase federally required coverage might fall short; for legal, political, or 

practical reasons. In that case, substantial resistance to retaining or purchasing required coverage 
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might wreak havoc with the ACA's other 'complex cross-subsidy schemes through insurance 

regulation (such as guaranteed issue, modified community rating, and essential health benefits). 

Perhaps more important, the new insurance system and expensive taxpayer subsidies to 

finance it were not scheduled to kick in fully until 2014 (in part, to reduce the initial, visible 10-

year budgetary costs of the ACA as a whole). The Obama administration and Capitol Hill 

supporters of the ACA approach knew they had to offer "something" to voters to address preexisting condition coverage problems in the interim from 2010 to 2014. Hence, the return of 

high-risk pools in a newer form, as federally funded mechanisms eventually labeled "PreExisting Condition Insurance Plans." 

The current administration may not always be effective in solving health policy 

problems, but it is much quicker and more adept at changing the name of whatever isn't working 

well and needs a stint in the public policy equivalent of the witness protection program for new 

identities (see, e.g., "marketplaces" as the 2013 name for unpopular "health exchanges"). 

The final law required that high-risk pools for people with pre-existing conditions be 

established within three months of the law's enactment (early July 2010) and operate until 

January 1,2014, when the new insurance rules and subsidies would go into effect. These highrisk pool provisions were hastily cobbled together as an afterthought to ACA's other, more 

sweeping reforms. Their basic structure and the early experience in implementing them remain 

likely to exacerbate, rather than resolve, the problems faced by states and patients. 

For procedural and political reasons, Democratic congressional leaders had to adopt the 

Senate's sketchy version of high-risk pools included within a bill originally passed in December 

2009. The new pools would operate very differently from the high-risk pools already established 
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in 35 states that were designed to operate with even more limited resources. The new state pools 

under ACA rules cannot allow any exclusions or waiting periods for coverage of pre-existing 

conditions. Age-based premium variation must be compressed (no greater than4: 1). Cost-sharing 

is restricted (though not extremely). Most important, enrollees can only be charged standard rates 

(even though their likely claims costs are significantly higher). Even the House version of highrisk pools passed in November 2009 (HR 3952) allowed premiums to be as high as 125 percent 

of the prevailing standard rate in a state's individual market (still the low end of what most 

existing state pools charged at the time). 

Those final rules were a significant departure from the practice of all then-current, statebased HRPs. Insurers in the new risk pools would be required to pay at least 65 percent of the 

costs of covered medical treatments and procedures (clashing with some states' established 

practices that required patients to pay for a greater portion of their treatments). In effect, the 

ACA aimed to impose on the new high-risk pools many of the restrictions it will place on 

insurance coverage, benefits, and premiums in the health exchanges to be established in 2014-

but starting three and a half years before the latter were fully drafted and implemented. 

However, both the earlier Senate and House versions of the health reform law, as well as 

the final one, tried to limit high-risk pool eligibility to those individuals already uninsured for at 

least six months. The House bill did establish somewhat better-defined "medically eligible" 

categories for such subsidized coverage (previously denied private coverage, offered such 

coverage with condition limits, or offered coverage at rates above those for high-risk pool 

coverage within the previous six months) than simply the Senate's looser requirement in section 

IlOl(d) of what became the final law's language that an enrollee also must have a pre-existing 
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condition as determined by the guidance ofthe Secretary of the U.S. Department of Health and 

Human Services (HHS). 

Despite Slow Take Up. Underfunded PClP Operations Run Out of Money 

By most initial estimates, the law also appeared to underfund substantially the PCIPs it 

requires, authorizing a total of only $5 billion for three and a half years of operation. The ACA 

provisions for these high-risk pools tried to get around the law's budget limitations by 

authorizing the newly mandated pools -- in section IIOI(g) (4) -- to "stop taking applications for 

participation in the program ... to comply with the funding limitation" when the money runs out. It 

also vaguely empowers the HHS secretary - in section 110 I (g) (2) -- to make "such adjustments 

as are necessary" to eliminate any deficit in the program during any fiscal year. In addition, the 

law suppresses potential demand for new high-risk pool coverage by limiting eligibility to people 

who have already been uninsured for six months. Merely having a pre-existing condition, and 

being turned down for coverage because of it, is not enough to gain access to subsidized 

coverage in the new pre-existing condition plans. Nor can one gain admission to the new pools if 

one is already enrolled in an existing state HRP but facing higher premiums with greater costsharing. After all, people in these circumstances are not already "uninsured for six months." 

In other words, the secretary ofHHS was first authorized to determine which pre-existing 

conditions make a potential enrollee eligible for federal PCIP coverage, and then, if budget funds 

ran short, the secretary was required to figure out how to avoid actually providing that person 

with the promised health-care coverage. The results seemed easy to foresee: waiting periods, 

abruptly closing enrollment, benefit limits, reducing plan options, raising cost sharing, and 

rationing of care - all the practices for which the ACA's champions attacked the private 

insurance industry and already-operating state HRPs. 
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With the announcement by HHS in mid-February of this year that it was suspending 

acceptance of new enrollment applications in federal and state peIPs (as of early March 2013) 

until further notice, we have arrived at this inevitable point; albeit perhaps a little later than first 

estimated. 

In April 2010, the chief actuary ofHHS released a cost projection for the new program, 

predicting that the $5 billion the law allocated for three-and-a-half years of high-risk pools would 

in fact be exhausted in the program's first or second year. The actuary estimated that only 

375,000 people shut out of insurance elsewhere would obtain health care coverage through the 

high-risk pools - a number that would fall far short of the potentially targeted population. 

However, early experience under the peIPs turned out quite differently. As of April 30, 

2011, enrollment in the program was a little over 20,000. Enrollment gradually rose to 107,139 

through January 31, 2013. An earlier estimate as of November 30, 2012 set the total number of 

people with medical conditions who have received coverage under PCIP at one time (in other 

words, total enrollment in the program's history, rather than its current enrollment) at 134,708. 

In any case, enrollment has fallen dramatically short of expectations, even after HHS redesigned 

its PCIP rules in mid-20ll to lower premiums even more and to make it easier for applicants to 

document that they had a pre-existing condition (sort of equivalent to a mid-summer "sale" on 

such coverage). 

One might ask whether flawed design and enrollment assumptions for the new, relabeled 

high-risk pools by the Obama administration and its congressional allies initially reflected 

reluctance to acknowledge the total cost to fully fund them on the scale that was commensurate 

with what those same parties claimed was a much larger pre-existing condition problem that 

justified other provisions of the ACA. Simply funding a potentially robust peIP solution would 
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diminish the rationale for controlling even more of the private health insurance market through 

sweeping regulation, tight premium controls, and complex cross subsidies. 

Or did the more limited funding dedicated to PCIPs under the law reflect the tacit 

acknowledgement that the actual pre-existing condition problem had been greatly exaggerated? 

For example, HHS suggested in August 2009 that up to 12.6 million Americans recently had 

been discriminated against by insurers on the basis of their health status. In January 2011, HHS 

upped the pre-existing condition overestimation ante, with the even extreme claim that up to 129 

million people could be denied affordable coverage without ACA-style health reform. The latter 

report blurred the difference between the many people with some existing medical condition and 

those actually denied coverage due to their health status, 

Most likely, the mismatch between the size of the purported problem and the amount of 

budgetary resources devoted to solving it represented a combination of both conflicting political 

impulses, along with the perceived budgetary imperative to suppress demand for such high-risk 

pool coverage and stretch out the limited taxpayer funding at least until broader coverage 

expansions under Medicaid and the new exchanges kicked in after the end of2013. 

Reasons behind Low Enrollment 

A July 20 II report by the Government Accountability Office (GAO) suggested that 

the primary reasons for lower-than-expected enrollment were the statutory requirement that 

applicants be uninsured for at least six months, lack of awareness of the PCIP program, and 

affordability concerns (not necessarily in that order of importance). 

The requirement that eligible enrollees for PCIP must first meet a 6-month period of 

being uninsured up to the time of their enrollment application was indeed a fundamentally 
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flawed condition for such coverage. After all, if someone is suffering from a high-risklhigh-cost 

condition and lacks access to any other insurance coverage, what is the public policy purpose 

behind then denying that person access to federally subsidized PCIP coverage? The "6-monthsas-uninsured" requirement operates as the close equivalent of an initial 6-month waiting period 

(older state-run HRPs generally utilize waiting periods ranging from 3 months to 12 months). 

GAO noted that "the segment of the uninsured population with pre-existing conditions 

has been difficult to identiry and target." A different observation might be that when you have 

trouble finding something, it might indicate it's a smaller problem that first assumed. PCIP 

administrators at least finally learned by 2011 that it helps to provide financial incentives to 

insurance agents and brokers to help identiry potential high-risk enrollees, rather than to try to 

bypass those parties as unnecessary and costly middlemen. 

The average out-of-pocket premium for enrollees in the PCIP program in 2011 was $407 

per month. Slow enrollment in PCIP further indicates that the primary reason for lack of 

insurance coverage in the United States as a whole is its unaffordable cost to potential purchasers 

in general (rather than just to those with particular high-risk conditions). Offers of free or very 

heavily subsidized coverage might encourage more substantial enrollment (leaving aside their 

budgetary costs), but the broader affordability problem is much greater than the slightly higher 

surcharges in premiums facing most individuals with pre-existing conditions. 

Exaggerating the Size of the Uninsurable Population,jor Political Marketing Purposes? 

The most likely explanation for low enrollment in PCIP is that the estimated size of the 

population denied coverage due to a pre-existing condition is much smaller in practice than the inexact 

estimates of various national surveys suggest. Older federal rules under the Health Insurance Portability 

and Accountability Act of 1996 (HIP AA) and the practical economics of selling insurance to more 
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customers means that there is much more protection against the risk oflosing (or tailing to gain) coverage 

due to high-cost conditions than assumed by ACA advocates. 

HlPAA made it unlawful for employer-sponsored plans to impose exclusions on pre-existing 

conditions for workers with sufficient periods of continuous group insurance coverage. This 

means that if a person stays covered by job-based plans long enough (roughly eighteen months 

ensures total protection, but lesser intervals still can provide partial protection against shorter 

pre-existing exclusion periods) with only very short periods of interruption in this continuous 

coverage, that person can move from one job to another without fear oflosing insurance 

protection, or of having to wait longer than other new hires before gaining coverage for ailments 

developed before taking a new job. The new employer's plan must provide coverage on the same 

terms as it is offered to other employees - even if the worker already has developed an 

expensive medical condition, or demonstrated early indications that it may develop in the near 

future. 

In theory, HIP AA also provided portability rights to people moving from job-based plans 

to individually owned coverage. The law gave state governments a few options for meeting this 

mandate: They could establish high-risk pools, which is the approach most states have followed; 

they could require that all individual-market health insurers within their respective states offer 

insurance to all eligible individuals, without any limits on coverage of pre-existing medical 

conditions; or they could use their regulatory powers to create a mix of rules that would have 

similar results. 

Unfortunately, none of these approaches worked well enough. Too many people still risk 

falling through the cracks. One problem in the pre-ACA world offederal health law stemmed 

from HIPAA's requirement that a worker first exhaust the right to temporary continuous 

coverage under the former employer's plan (through a federal program called COBRA, which 
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lets a worker keep buying into a previous employer's insurance plan, generally for up to 18 

months after leaving that job) before entering the individual insurance market without being 

subject to a pre-existing condition exclusion. Many workers are not awate of this requirement 

(though their former employers must advise them of it in a written notice). Even if they are, the 

premiums required to stay in an employer's plan through COBRA are often too high for workers 

to pay on their own. COBRA premiums must cover both the employer and employee share of 

costs, and such employer plans generally provide more expensive comprehensive benefits than 

individual-market alternatives. Unlike premiums paid in employer-based plans, these COBRA 

premiums do not receive any tax advantage - making them even more expensive to workers 

between jobs and/or other employer-sponsored coverage. As a result, many workers experience 

the "sticker shock" of facing this fully loaded price for the first time. They choose not to pay the 

noticeably higher premiums and take the risk of going without coverage until they can find new 

jobs (and new coverage). In so doing, they may inadvertently waive their HIPAA rightsleaving themselves vulnerable (under pre-ACA law) to exclusions and high costs for pre-existing 

conditions when they finally try to buy insurance on their own. 

Even if a sick person abides by HIP AA' s requirements and remains continuously insured 

- thereby maintaining protection from pre-existing condition exclusions in the individual 

market, nothing in current federal law before full implementation ofthe ACA's insurance 

requirements in 2014 prevents insurers from charging this individual more than they charge 

healthy people. Insurers are prohibited only from denying coverage altogether for a pre-existing 

condition; it is quite permissible, however, for insurance providers to charge unaffordable 

premiums (unless an individual state's laws happen to prevent or restrict the practice), thus 

producing essentially the same outcome 
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Pre-ACA law and regulations also provided no premium protections for persons moving 

between individual insurance policies. A healthy worker who left an employer plan for the 

individual market might find an affordable plan at first - but if she ever wanted to switch 

insurers (or was forced to by moving to a new state, for example), she would face the risk of 

having her premium recalculated based on a new health-risk assessment. 

However, the problem of pre-existing condition coverage is limited almost entirely to the 

individual market. In 2008, at the request ofHHS, health economists Mark Pauly, Bradley 

Herring, and Xue Song examined how people with chronic health conditions, and thus high 

anticipated health-care expenses, actually fared when seeking insurance in the individual market. 

Pauly and his co-authors found little, if any, evidence that enrollees in poor health generally paid 

higher premiums for individual insurance. Nor did they find that the onset of chronic conditions 

is necessarily associated with increased premiums in subsequent years. Existing "guaranteed 

renewability" requirements in federal and state law already prevent insurers from continuously 

reclassifying people (and the premiums they pay) based on health risks. And most private 

insurers already provided such protection as standard business practice before they were legally 

required to do so. 

Although the risks of facing coverage exclusions and prohibitive premiums caused by 

pre-existing conditions were not a universal problem in the individual insurance market at the 

time of ACA's enactment, they clearly affected many Americans. Reasonable estimates range 

from 2 to 4 million, out of a total population of about 260 million people under the age of 65. 

More important than this number alone, however, is how many more Americans know someone 

who has faced this situation directly, and fear that they could find themselves in the same 

predicament. The latter perception explains the strong public support for changing the way 
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insurance companies treat pre-existing conditions. Most people find it unacceptable that other 

citizens who have tried to act responsibly by staying insured throughout their lives can suddenly 

find themselves sick, perhaps unemployed as we11, and unable to get adequate coverage. 

On the other hand, in order to stay financially solvent, insurers clearly need some way to 

match premiums and likely claims costs. Because the smaller individual market often operates as 

a last resort for those lacking better insurance options through employers, insurers must plan for 

the risk that people seeking individual coverage are more likely to do so because they believe 

they will need substantial medical attention. 

Nevertheless, there are both practical limits and basic business incentives that restrain 

excessive underwriting by insurers. For one thing, individual screening of health risks is 

expensive. Moreover, if insurers screen too aggressively, they will lose customers whose care 

would not in fact have been very costly. Insurance companies balance the benefits of screening 

against these costs in the individual market no less than in others: Indeed, the most extensive 

research in this area, by Pauly and Herring, has demonstrated that there is already a great deal of 

pooling of health risks in the individual market. (Pauly and Herring also found that there is less 

pooling than assumed in the employer-group market, due to wage offsets for some types of 

workers likely to incur significantly higher health care costs.) 

But some people clearly have not been able to get covered due to the higher health risks 

they present to potential insurers. 

The last comprehensive survey of the individual insurance market (in 2009) by America's 

Health Insurance Plans (AHIP) provided mixed findings. On the one hand, it found that 87 

percent of applicants undergoing medical underwriting were offered coverage, with 65 percent of 

them receiving premium quotes at either standard or preferred rates. However, 34 percent of 
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those individual market applicants were quoted higher than standard rates (a significantly higher 

percentage than found in previous AHIP individual market surveys). Nevertheless, only 6 

percent of all those coverage offers included condition waivers that restricted coverage of a 

particular health problem. 

Can High-Risk Pools Handle Most o/the Serious Pre-Existing Condition Coverage Problem? 

Before considering whether a high-risk-pool approach can handle most of the preexisting condition problem, one needs to know how large is the potential population needing 

such assistance. This remains a far from simple question that is prone to exaggeration on both 

sides, but several serious attempts to arrive at a reliable set of estimates have been made in recent 

years. 

In a 200 I survey by HHS, respondents were asked if they had "ever been denied health 

insurance because of poor health." The data collected indicate that about 2 million people might 

be eligible for enrollment in high-risk pools. 

In a different study, using 2006 data, the Government Accountability Office determined 

roughly the percentage of uninsured individuals who had at least one chronic health condition, 

and then applied it to census estimates of the average number of uninsured people in each state 

with an existing HRP. (The aim was to get a sense of how many more people might be covered 

by such pools if they were available to all who needed them.) The GAO concluded that as many 

as 4 million Americans could be covered by more generously funded high-risk pools - 20 times 

the number then covered by state HRPs. 

More recently, University of Pennsylvania health economist Mark Pauly looked at data 

about the number of people with chronic health conditions whose expected medical expenses are 

more than twice the national average. He first estimated the total nationwide high-risk group at 
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around 4 percent of the under-65 population, excluding people receiving Medicaid - a number 

in the low millions. But Pauly ultimately concluded that the number of people who were both 

high-risk and looking for coverage in the individual market at any given point was far lower -

on the order of tens of thousands. 

Regardless of the particular sources or estimating methods, which all have their 

limitations, it is clear that the demand for premium assistance among those with high expected 

health costs substantially exceeded the pre-ACA financial capacity of then-operating state HRPs. 

Comparing Federal and State Approaches to Pre-Existing Condition Coverage 

Only twenty-seven states elected to administer a PCIP for their residents. Twenty-three 

other states and the District of Columbia chose to allow HHS to administer such plans. States are 

said to have some administrative flexibility in establishing their own PCIP program premium 

rates, insurance benefits, enforcing enrollment and appeals procedures, and determining how 

eligibility requirements are satisfied. However, all of those state practices must remain consistent 

with federal guidelines and the concurrence ofHHS. 

For example, federally run PCIPs do not vary premiums by smoking status or geographic 

region within a state, whereas 11 state-run PC IPs did the former and 7 state-run programs did the 

latter in 2011. Until July 2011, federal-run PCIPs did not allow potential enrollees to 

demonstrate evidence of a pre-existing condition by a letter with a doctor's diagnosis, whereas 

most state-run PCIPs allowed this option. About 7 state-run PC IPs also allowed evidence of an 

applicant's receiving a private insurance premium offer that was higher than the premium 

charged in that state's own PCIP. 

Monthly premiums generally are lower in federally run PCIPs. They have been roughly 

20 percent higher in state PCIPs since 2011. State-run PCIPs got off to a much better start in 
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enrolling individuals in 2010, but they now account for about 60 percent of the program's total 

enrollment. The average per member per month costs do not differ substantially between federaland state-run PCIPs overall. 

Both types of PC IPs have incurred administrative costs that run above the ACA's 10 

percent limit for state-run PCIPs (19 percent of costs were administrative in state PCIPs in 2011; 

they amounted to 16 percent in federal PCIPs that year). Thus far, there has been no move to 

require rebate payments to enrollees for "excessive" administrative costs. 

Among the 27 states operating PCIPs, 20 of them also administer a pre-ACA state HRP. 

Those states are subject to the ACA's maintenance of effort requirement that they maintain the 

same pre-ACA level of funding for their state HRPs until January 2014. Arguably, this provision 

operates as some degree of budgetary disincentive for states to administer PC IPs, because it does 

not apply if there is a federal PCIP in the state .. 

The average PCIP enrollee is roughly three times as costly as an enrollee in a state HRP 

($32,108 per year versus $11,140; the latter is a 2011 average cost). Note that if these figures are 

just taxpayer-subsidized costs, rather than total health care costs including enrollees' premiums, 

the latter appears to be out of line with a GAO finding in a 2009 report that subsidized costs in 

state HRPs averaged $4341 in 2008. State HRPs continue to have much larger enrollmentapproximately 223,574 (some states only report 2012, rather than 2013, numbers). 

Some analysts excuse the much higher PCIP costs per enrollee, for a smaller population, 

as due in part to a higher concentration of very expensive enrollees, including those who have 

lacked insurance coverage and regular access to health care for a longer period oftime (due to 

the requirement that they first be uninsured for at least six months). In addition, as least onequarter of state HRP enrollees are individuals who have gained portability access to individual 
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market coverage from recent continuous coverage in the employer group market, and they are 

arguably less costly to cover (although no official source appears to be estimated how much of a 

difference this actually makes). 

Key Takeaway Paints 

Pre-existing condition insurance plans represented a poorly designed, half-hearted gesture 

within the ACA, aimed primarily at minimizing political risks rather than addressing a serious 

problem more immediately and comprehensively. PCIP coverage served more as a cosmetic 

patch to cover the consequences of slow implementation of complex coverage provisions 

scheduled to begin in January 2014 (nearly four years after enactment of the health law). 

The PCIP program never received sufficient funding to do its job seriously. That 

indicates where it stands in the relative level of priorities for the drafters of the law. The 

relatively small amount of funding and limited attention to the program's structural details 

appear to conflict with the exaggerated rhetoric of the Obama administration in claiming that the 

extensive problems oflack of coverage for tens of millions of Americans with pre-existing 

health conditions were the prImary political rationale for enacting the ACA's regulatory, 

coverage, and financing provisions. Either the funding should have matched the claims of major 

problems, or the clams should have matched the funding commitment levels. 

The political ideology behind the core policies of the ACA (installing guaranteed issue, 

community rating, mandated coverage, richer standard benefits, and federal regulation of health 

insurance) trumped targeting the smaller, but significant, problem of several million Americans 

with limited or no insurance coverage due to serious pre-existing health conditions and 

addressing it more effectively. 
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The ACA's PCIP program managed to solve LESS of the problem (fewer enrollees), at a 

higher per-person cost, while still running out of money. At the same time, it discouraged 

continuation beyond 2013 of better, tested, state alternative mechanisms (better-funded high-risk 

pools). 

By setting its premiums for all at no more than standard rates --- contrary to better 

practices of older state HRPs which charge more, and also imposing a 6-month spell as 

uninsured to qualifY for coverage, PCIP only succeeded in mostly enrolling very desperate, highcost individuals who had no other alternatives for coverage. This may account for a portion of 

the program's much higher per-enrollee claims costs, but more extensive audits of the plans' 

administrative operations and care management practices are needed to ascertain causes and 

effects. 

States administering pre-ACA HRPs did a better job by charging enrollees somewhat 

higher premiums, offering less comprehensive coverage, and focusing on those individuals who 

presented the most serious and costly medical conditions. However, they, too, still need more 

robust sources of funding to do their job more thoroughly and effectively. 

Simply trying to average (and hide) the same total health care claims costs across a 

somewhat wider base (the ACA approach) may redistribute them, but it does not reduce them. 

If the forthcoming health exchanges are plagued by premium spikes, implementation 

misfires, limited enrollment, and adverse selection, they may more closely resemble somewhat 

larger versions of state-level PCIPs than more competitive alternatives to the current private 

insurance market. 

Policy Lessons and Partial Fixes 
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I have written elsewhere about more comprehensive repeal and replacement of most, if 

not ail, ACA provisions, including those involving coverage of pre-existing health conditions. 

The current political and legislative environment makes enactment of those proposals 

(continuous coverage incentives, more generous federal assistance to state high-risk pools, 

better-targeted insurance coverage subsidies) in the near term unlikely. In the meantime, 

policymakers should consider the following: 

• Recognize that health care markets are local, not national. So too are problems for 

persons with high-cost conditions. 

• The rhetoric of delegating administration of sensitive health policy provisions to state 

governments needs to be matched by the reality of federal officials letting go of tight 

reins and trusting state officials with more discretion over eligibility, benefits, and 

appeals issues, within much broader outcome-oriented federal parameters. 

• Be very cautious about imprecise estimates (guesses) regarding the scale, scope, and 

costs of the medically uninsurable and others with inadequate resources to handle very 

high-costlhigh-risk health conditions. 

• Commit a generous amount of a series of capped annual appropriations to support 

continued operations of state HRPs and/or restructured peIPs, to be revisited upon 

subsequent evidence of larger enrollment demand or higher (but medically necessary) 

costs. Avoid early commitments to open-ended entitlement formulas 

• Publicly subsidizing the high-cost "tail" of health risks can strengthen the rest of the 

insurance market. (See previous experience with expansion of Medicare insurance 

coverage for the disabled). 
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• Raise unsubsidized premiums charged for most enrollees in high-risk pool plans (to at 

least 150 percent of standard rates), but then provide income-based subsidies for lowerincome persons. Separate the issue of income support from that of protection against 

losing or lacking coverage solely due to elevated personal health risk. 

• Develop better targeted and more intensive care management tools within HRPs or PClPs 

for the highest-cost cases. 

• Complementary policy reforms can help (better portability from group to individual 

market with creditable coverage, don't require exhaustion of COBRA benefits, retarget 

premium subsidies, build information transparency mechanisms that reward better patient 

choices and provider practices) 

• Keep as many older state HRPs as possible in business post-2013, as an "insurance" 

policy against major problems in exchange implementation and individual mandate 

enforcement/compliance. Allow such coverage to be considered "qualified insurance" 

under ACA to minimize post-20 13 disruptions in the continuity of coverage and care. 

• If the overall costs of health care don't rise more slowly, and individual incomes don't 

rise more rapidly, in the near future, no amount of subsidized insurance tinkering can 

keep up with a larger problem. Incentivize better personal health behavior and health care 

decisions, within a more competitive and accountable health care marketplace. 

• Remember that the pre-existing condition issue is still a largely limited, modest problem. 

Solve it, instead of using it as a political excuse to hijack the REST of the private 

insurance market. 

Thank you again for the opportunity to present this testimony. I look forward to your 

questions. 
99 

Mr. PITTS. The Chair thanks the gentleman and thanks all the 

witnesses for their opening statements, and I will now begin questioning and recognize myself 5 minutes for that purpose. 

Mr. Miller, let us just continue with you. You have given us a 

great list. When Obamacare was enacted into law, you wrote that 

the program was designed in a way that would lead to inevitable 

problems. What are the principle features, if you could name a couple, of PCIP that led you to believe that the program would run 

out of funding? 

Mr. MILLER. The program was weighed down by the larger overall program, but within the provisions of PCIP, the two core provisions, of course, are designing it with the 6-month requirement for 

uninsured coverage, which created a flaw in it from the start, and 

secondly, the massive underfunding relative to what the potential 

range of the problem was. The only reason why some budget estimates said, well, we might get under the wire on this, CBO simply 

said, well, they will close down the program when they run out of 

money, and the actuary who readjusted a little bit of the original 

program from HHS basically said the same thing. They have provisions written into the law for the PCIP administrators or HHS to 

carry out the worst practices of the private insurers they blame, 

which is as soon as we run out of money, we hollow out the benefits, we close the doors, and therefore we have met our budget, and 

it is not surprising that we got there. Maybe we got there a little 

later because it was a slow take-up but in essence it was a program 

designed to have an early expiration date on the coverage. 

Mr. PITTS. Thank you. 

Governor, you mentioned a number of administrative problems 

and litigation. Are you still having administrative problems with 

the feds or with HHS regarding the administration of your pool? 

Is all the litigation solved? 

Ms. TAYLOR. The most recent lawsuit has. We have come to an 

agreement on the resolution of that. As I did say in my testimony, 

we are pleased that the Department of Insurance continues to be 

seen as the regulatory arm of health insurance in Ohio, at least as 

it relates to the High Risk Pool, so at this point the two major 

issues that we face, both the rate issue in 2011 and protecting consumers and protecting consumers’ coverage in Ohio have both been 

resolved. 

Mr. PITTS. Thank you. 

Ms. Zurface, can you describe your thoughts at the time when 

you found out that PCIP was not an option due to HHS closing the 

program to new applicants? 

Ms. ZURFACE. I can try. It was sort of an interesting experience 

for me. I had, as I indicated in both my written and my oral testimony, started in February trying to figure out how I would now 

begin to finance this very expensive health venture, and one of the 

things that I came across was the Ohio High Risk Pool insurance. 

I saw my specialist at the end of February, and at that time my 

specialist indicated to me that he would like for me to enter into 

a clinical trial that is having very good results for lenalidomide in 

the treatment in my specific chronic lymphocytic leukemia, which 

is chemotherapy resistant and a bit more aggressive due to chromosomal mutations. So he had suggested that I go ahead and enter 

100 

into that clinical trial at this time. I actually took some time to 

step back from that, being basically healthy at this point, and said 

I think I want to take a little bit of time and watch my numbers 

and see exactly what this cancer is doing inside my body and what 

I need to do to manage it at this time. It was within about a week 

and a half, 2 weeks from that point in time that I found out that 

maybe I don’t have the time to step back and do that because if 

I don’t enter into that clinical trial sooner rather than later, then 

it is likely that that trial will fill up and there won’t be any type 

of reasonable, affordable treatment option available for me. So I 

really had to step back and assess what I am going to do with regard to my health care condition at this time. 

Mr. PITTS. Now, because you are self-employed and not able to 

work at this time, as I understand it, your treatments are covered 

by Ohio’s Hospital Care Assurance Program. Is that correct? 

Ms. ZURFACE. At this time, as long as I take my care through 

Ohio State Medical Center, I do qualify under their regulations for 

the HCAP program, and in fact, there is a separate program administered for OSU physicians. So as long as the part of my care 

that is managed at OSU Medical Center is actually covered on a 

quarterly review basis, so each quarter they will flag my status and 

I will have to resubmit income, profit and loss information for that. 

Mr. PITTS. So long as your income remains below a certain level, 

this program will cover you? 

Ms. ZURFACE. Yes, sir. 

Mr. PITTS. And are you saying that it would be more beneficial 

for your health to not work and be covered by HCAP than to work 

full time and surpass the income minimum and have no coverage 

at all? 

Ms. ZURFACE. I would argue that it is never more beneficial for 

my health for me to not be working. Both mentally and physically, 

it is better for me to be as active as I possibly can be. From a financial standpoint, it may look like at least on paper that it would 

be more beneficial for me to choose not to work or at least not to 

work at a full capacity in order to maintain health care. 

Mr. PITTS. My time is expired. I have a lot more questions for 

you but let us go to the vice chairman, Dr. Burgess, for 5 minutes 

for questions. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Ms. Zurface, let me just ask you, you are an attorney. I actually 

am a physician in my previous life. So we both are in professions 

that are—we went into them to help people, and if I understand 

your testimony correctly, you in fact function as a public defender 

at some point. Is that correct? 

Ms. ZURFACE. Somewhat. The program that we have in my county is called court-appointed counsel. All of the attorneys in our area 

that practice criminal law actually serve as court-appointed counsel, but it is very similar to the public defender program. 

Mr. BURGESS. And you of course are paid for that work, are you 

not? 

Ms. ZURFACE. I am. 

Mr. BURGESS. And where does that payment come from? 

101 

Ms. ZURFACE. That money comes out of the county fund. Our 

county commissioners establish an hourly rate for our court-appointed counsel. 

Mr. BURGESS. Well, wouldn’t it be better if the federal government just took that over and we paid you for that? 

Ms. ZURFACE. Oh—— 

Mr. BURGESS. You don’t have to answer. 

Ms. ZURFACE. I was just going to say—— 

Mr. BURGESS. It is rhetorical. 

Ms. ZURFACE [continuing]. It is a rhetorical question. I wonder 

how the federal—where that money would come from with regard 

to the federal government and why would it be better if the federal 

government—— 

Mr. BURGESS. The same place all of the money comes from. Take 

it from someone else at the point of a spear and they give it to us 

willingly after we threaten them with lifetime incarceration and 

the impounding of all their personal property. 

But Lieutenant Governor, your discussion of how difficult it is to 

work with Health and Human Services and the Centers for Medicare and Medicaid Services, to me, that would be an argument 

against the federal government taking over that program that the 

county is so ably administering and taking care of those people who 

get into trouble with the law but are too indigent to afford their 

own lawyer. Would that be a correct assumption? 

Ms. TAYLOR. Mr. Chairman, Dr. Burgess, yes. Our experience 

specifically with the High Risk Pool working with HHS, working 

with the federal government, has proven to be less than rewarding. 

I think States are well prepared to regulate insurance as we have 

done for, you know, decades, and I think that these types of issues 

are best addressed closer to home where you can react quicker and 

in a more thoughtful way with regard to market changes, economic 

conditions, the needs of your citizens. It is a long way of saying yes. 

Mr. BURGESS. Yes, you can react quicker, and that is important, 

and you know the people with whom you are dealing. I mean, your 

State is arguably a little different from my States, and the needs 

and the things that would need to be met for the constituents 

might be different in the two States, and you are in a position and 

your counterpart in my State would be in a position to have the 

facility to be able to make those decisions on a much more realtime basis. 

I just have to tell you, I sat down with your counterpart in my 

State on Monday, and of course, this is a little far afield from what 

we are talking about today but the Medicaid expansion, which is 

being much discussed, and the litany of complaints that come forward from the State folks about trying to deal with the Centers for 

Medicare and Medicaid Services. They have created a regime over 

there which is almost impenetrable. So it is any wonder that no 

one at the State level wants to buy—they don’t want to buy any 

more of that. They have had enough of it, and I certainly understand that. 

Mr. Miller, I remember back to 2008, and we actually talked 

about this issue of the State risk pools a lot back in that year, as 

I recall. I don’t remember why we discussed it but we did, and I 

got to tell you, I was a little bit encouraged after the summer town 

102 

halls of 2009 that I alluded to, and those were somewhat rough 

events, but we came back to Washington in September and the 

President was going to address a joint session of the House and 

Senate, and I thought, oh, good, they have realized the error of 

their ways and they are going to put the pause button on here and 

we are going to hit the reset button, but alas, I was mistaken. It 

was fast forward, if anything. 

But one of the things the President said that day that really got 

my attention or that night and it really got my attention was that 

Senator McCain was right with his approach to helping people with 

preexisting conditions and this expansion of the State pools and reinsurance, that might be the way to go, and I thought for a brief 

moment there was a glimmer of understanding but what do you 

think happened? 

Mr. MILLER. Well, they had some of the music but not all the 

lyrics. Consensus is often a mile wide and an inch deep in those 

type of things, and that was in a compromise moment to try to get 

some type of legislation through while bowing in the direction of 

temporary bipartisanship. There are always seeds of agreement between the two sides and then we kind of get overpowered by broader imperatives to get it all and to implement your program and get 

it, you know, comprehensive. You can find Republicans and Democrats agreeing we need to help people who are in desperate straits, 

who can’t help themselves. We need to be generous and kind and 

compassionate as a good society. But there is a difference between 

doing that and running everybody else’s life in micro detail, and 

that is what we got as kind of—you know, the loss leader was, well, 

we will do some things for some people we can give you an anecdote about, but meanwhile, look at the rest of what the law is going 

to do. It is turning upside down what are the arrangements that 

people are quite happy with and would like to continue and you are 

going to be in a different world within a year. All these ideas that 

somehow waves of happy, young and healthy people will be ready 

to pay twice as much in their insurance premiums and everyone 

will come out ahead and everybody will be subsidized, it is not 

going to work that way, and that is the problem in trying to shoehorn people into theoretical arrangements that don’t match their 

preferences and practices. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. We are going to continue with another round. We have got lots of questions here. 

Let me continue with you, Ms. Zurface. What do you plan to do 

now that funding for the new enrollees in the PCIP program has 

been pulled by HHS? 

Ms. ZURFACE. I am going to take it one day at a time. I have no 

choice but to continue with my medical care, so I am going to continue making my appointments and managing my care as best I 

can, do my very best to not incur great expense to myself and see 

what is available for me, and I will take advantage of the HCAP 

program and any similar program that is available. I will take advantage of whatever the Leukemia and Lymphoma Society is able 

to offer. I will just take it one step at a time. 

103 

Mr. PITTS. The added burden of not knowing if your CLL treatments will be covered must add unneeded stress to your life as a 

single mother, does it not? 

Ms. ZURFACE. It sure does. 

Mr. PITTS. Mr. Miller, after HHS’s announcement that new applicants would be shut out of the preexisting condition program, we 

sent a letter to the President asking to work together to redirect 

funding in the President’s health care law to ensure that no sick 

American is turned away, and as I mentioned, 1 month later we 

have yet to hear from the President. My understanding is at the 

time of enactment, roughly 18 programs in PPACA received greater 

or comparable funding than the preexisting condition program. 

Couldn’t this funding such as the mandatory appropriations in the 

Prevention and Public Health Fund provide the resources to help 

enroll new individuals in a high-risk pool program? 

Mr. MILLER. It could certainly help contribute to it. The Administration apparently has broader priorities which look more at 2014 

than what people are going through in 2013. I know some of the 

money has been taken out of the Prevention and Public Health 

Fund for the doctor fix, so it is a bit of a basket that gets raised 

several times. There might be, I think, $8 billion or $9 billion, depending on how you want to count it, for the remaining authorization. That could certainly make a contribution to provide real relief 

of a tangible nature. A lot of the stuff in the Prevention and Public 

Health Fund is a little bit more on the exotic side. It could be done 

in the right way but we don’t have much evidence that is actually 

working in that manner. It is a little bit more of a political slush 

fund. So that would provide some means of a contribution. 

We will need more money than that if you wanted to do this on 

a longer-term basis, and I think there have been previous proposals 

for more enhanced funding in a different environment, and I am 

not sure if the votes are there to get that right now. But when you 

are looking at people who have a very identifiable condition—you 

know, these are the folks who you would want to put into a specialneeds plan. We know they have got a serious condition. They need 

actually more intensive medical management. You would like to coordinate. You have already identified the population. It is going to 

cost money to subsidize them. That is something we should do and 

that should be a higher priority perhaps than subsidizing everyone’s insurance all the way up to 400 percent of the federal poverty 

level. But that is a different political agenda than helping the most 

unfortunate people right now in ways that can help. 

Mr. PITTS. Dr. Collins, in your opening statement you said that 

PCIP provided immediate coverage for preexisting conditions. However, this leaves out an important context. Didn’t the ACA require 

patients to be uninsured for 6 months before they became eligible 

for PCIP? 

Ms. COLLINS. Right, so the intent of the PCIP program was to 

provide immediate coverage for people who had been uninsured for 

a long period of time, or at least 6 months, and to immediately 

cover their preexisting conditions. As Mr. Miller pointed out, most 

State high-risk pools do not cover your preexisting condition right 

away, so the intent of the law was to cover people’s conditions immediately. The intent was also to provide insurance coverage to 

104 

people who didn’t have health insurance coverage, so that was very 

clear in the law. It was designed as a transitional provision so that 

people who are uninsured who had immediate health care needs 

could get coverage over this 3-year period. 

Mr. PITTS. Well, Ms. Zurface’s testimony indicates that this requirement had real effects on patients desperately seeking coverage 

for a preexisting condition. Didn’t this requirement essentially force 

patients to let their conditions deteriorate while they waited for the 

ACA’s arbitrary 6-month waiting period to run out? 

Ms. COLLINS. It was certainly difficult for people who had to wait 

to get coverage. It is one of the characteristics of our current insurance system that will go away next year where people are prevented from pursuing careers like Ms. Zurface is right now in 

terms of having more flexibility in their jobs, their educational pursuits because they have to not make above a certain amount of 

money to maintain their health insurance coverage. All that goes 

away in January so that people don’t have restrictions on what 

they can do anymore in their careers just to maintain their health 

insurance coverage. So this was again a transitional provision. 

There were several transitional provisions in the law. This wasn’t 

the only one—the ban on lifetime benefit limits, the phase-out of 

annual limits on what health insurers can place on your benefits, 

so this was part of a large number of provisions that went in right 

away that did provide coverage to a lot of people who really needed 

them—young adults. About 6 million young adults came on to their 

parents’ policy over the last year. So they were in no way designed 

as the endpoint in the provisions but as really a beginning point. 

Mr. PITTS. I wanted to get one more question in. Mr. Pollack, 

does it concern you that the Administration has cut off funding for 

this program? 

Mr. POLLACK. Obviously I would like to make sure that everybody who has a preexisting health condition can get coverage, and 

it is very concerning that people who have a preexisting condition 

like Ms. Zurface are right now without the opportunity to get the 

coverage they need. But what is very important in terms of the 

compassion that we have all talked about with respect to people 

with preexisting conditions is that come January 1, all these problems are a thing of the past. People are not going to have to wait 

6 months in order to get coverage. People are no longer going to 

be put in a totally different pool just because they have got a 

health problem. People are no longer going to be charged a discriminatory premium because they have got a health problem. So 

to the extent that you, Mr. Chairman and Mr. Vice Chairman, are 

interested in fixing this temporary problem with additional funds, 

we support that, but not by undermining the long-term architecture of the legislation which is going to be far more effective than 

this temporary measure. 

Mr. PITTS. Thank you. My time is expired. Dr. Burgess, you are 

recognized for another 5 minutes, second round. 

Mr. BURGESS. Undermining the long-term architecture. Well, 

that is an elegant of talking about something when in reality what 

we should have been told 3 years ago before this thing was signed 

was the dog ate my homework so I am going to turn in the rough 

draft, and Ms. Zurface in her testimony talks about how this parVerDate Nov 24 2008 16:02 Jan 14, 2014 Jkt 037690 PO 00000 Frm 00110 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-24 CHRIS
105 

ticular provision was not in the bill that passed this very committee on the House side in July of 2009 but it was added. The 

Senate Finance Committee staff added it. In fact, most of this was 

written by the Senate Finance Committee staff. It wasn’t even 

written by legislators. And the thing was rushed through on 

Christmas Eve. There was a big snowstorm coming to town and the 

Senators wanted to get home for Christmas so they had to vote on 

it. And they voted, and they got 60 votes for the Affordable Care 

Act. 

Now, everybody felt—I am sure Chairman Waxman if he were 

here would tell us that he was working on the conference committee even before Christmas and New Year’s that year, and he 

was preparing himself for the conference committee. The President 

came to the Democratic retreat that year and all the discussion 

was how we are going to get this ironed out even before the conference and we will get a bill that both the House and the Senate 

can support. But it didn’t happen, did it? Because there was a special election in Massachusetts. Scott Brown was elected, the first 

time a Republican was elected from Massachusetts since the Earth 

cooled the first time, and there were no longer 60 votes in the Senate. So Harry Reid told Nancy Pelosi this is it, this is what you get, 

I can’t change it. So most people don’t realize this. H.R. 3590 was 

the bill that was voted on on Christmas Eve. Thirty-five ninety was 

passed by the House of Representatives in July of 2009 but it 

wasn’t a health care bill then, was it? It was a veterans’ housing 

bill. A veterans’ housing bill passed the House. I don’t think many 

people voted against it. It went over to the Senate, sat in the hopper, and then it was amended, and the amendment read ‘‘Strike all 

after the enacting clause and insert’’ and this was what inserted. 

So here you had a bill that had passed the House in a different 

form, passed the Senate, came back over to the House, and if you 

don’t change anything, you can sign it into law, and that is what 

the next 3 months was all about: how to convince enough Democrats to vote for really what was a rough draft. It would never have 

done what this thing has done to Ms. Zurface if it had been fixed 

but there was not the ability to fix it because there weren’t 60 

votes for any type of fix in the Senate. It was the very worst type 

of process that gave rise to the very worst type of policy and then 

for reasons that I will never understand got signed into law, and 

we are having to deal with it, and we can see it affects real people 

in very profound ways. 

Now, I would submit that the letter that the chairman referenced 

to the President, and I realize it is just a band-aid on a problem, 

Mr. Miller, but the Prevention and Public Health Fund, yes, we 

have raided it for a lot of things—trade promotion authority, doc 

fix—so let us raid it for this as well. I mean, goodness knows, it 

is a political slush fund. It was added, again, by Senate Finance 

staff for reasons that I certainly am not privy to. I think, Mr. 

Chairman, perhaps we can submit again to the President that he 

reconsider his inaction on this because we have heard testimony 

from compelling witnesses today that something needs to be done 

before we can all lay down in the Elysian Fields of the Affordable 

Care Act on January 1, 2014, we are going to have to deal with 

this, and the Prevention and Public Health Fund I think is the logVerDate Nov 24 2008 16:02 Jan 14, 2014 Jkt 037690 PO 00000 Frm 00111 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-24 CHRIS
106 

ical place to go. If there is not quite enough money there, then certainly let us go to the Patient Center for Outcomes and Research 

Initiative. There is another place where a lot of dollars are just sitting. The Center for Medicare and Medicaid Innovation, a lot of 

dollars are just sitting. There is no reason to have them just sit 

there. Let us them let them help real people and help real people 

today. 

Now, Mr. Pollack, in your testimony you said in your calculation 

68 million people have preexisting conditions, and 100,000 are now 

covered under the federal PCIP program. There is a bit of a discrepancy between those two numbers, isn’t there? 

Mr. POLLACK. Of course there is, and I explained that. The reason that—— 

Mr. BURGESS. And I accept your explanation. 

Mr. POLLACK [continuing]. There is a discrepancy with respect to 

that—— 

Mr. BURGESS. Let me ask you the question, sir—— 

Mr. POLLACK [continuing]. Explained right at the beginning—— 

Mr. BURGESS [continuing]. Before my time runs out—— 

Mr. POLLACK [continuing]. Is that most of those folks are in employer-sponsored insurance, and it has the same attributes and 

protections—— 

Mr. BURGESS. And those very folks begged us—— 

Mr. POLLACK [continuing]. That will not be provided in the individual market. 

Mr. BURGESS [continuing]. Begged us not to disrupt what they 

were receiving, and it looks like we have. But let me ask you a 

question. If you thought that this was a serious problem that it 

was, was the Administration wrong in only putting $5 billion toward this problem? 

Mr. POLLACK. Would I favor more money put into this as the 

temporary measure? Of course I would. And I certainly would like 

to see the temporary problems that are significant problems that 

they be fixed but not by undermining, as I said before, the key architecture of the Affordable Care Act, whether it is a prevention 

care fund, which is very important to promote good health care. It 

shouldn’t be sickness care; it should be health care. 

Mr. BURGESS. Sir—— 

Mr. POLLACK. And I don’t think that we should be undermining—— 

Mr. BURGESS. Reclaiming my time. 

Mr. POLLACK [continuing]. With respect to clinical guidelines. 

Mr. BURGESS. The architecture underlying the Affordable Care 

Act is anything but elegant; it is bizarre. It would be the nicest 

way to describe it. It is macabre. 

And honestly, I cannot—if the money is there in other programs, 

Mr. Chairman, I cannot see why the President and the Secretary 

have not responded to what is a very reasonable request that this 

committee has submitted in written form, and I will just reiterate 

that I think they should respond, and if they don’t, I believe we 

should ask the question again as nicely as we possibly can. I will 

yield back, Mr. Chairman. 

107 

Mr. PITTS. The Chair thanks the gentleman. We are going to go 

to another round, if that is OK. I still have some questions. I think 

you do. 

Governor Taylor, in your testimony you state that Ohio commissioned a study to estimate the effects of PPACA on premiums when 

the law is fully implemented. It found that premiums will increase 

by as much as 85 percent. Recently, the Society of Actuaries issued 

a report with a similar finding, estimating that Ohio’s individual 

market could see premium increases as high as 80 percent. Do 

these estimates lead you to believe that many will forego coverage 

because of the ACA’s costly requirements? 

Ms. TAYLOR. Mr. Chairman, we are clearly concerned by the 

changes that will be implemented starting in 2014 that are going 

to very severely negatively impact the cost of premiums in Ohio. 

Both studies are somewhat consistent in that premiums in our individual market will rise by as much as 85 percent. Of course, from 

a State perspective, yes, I am concerned. I would prefer to have 

more flexibility to come up with individual State solutions that 

solve Ohio’s problem and Texas, solve your problem the way it best 

suits Texas, and I think given some flexibility, our goal would be 

to use a more market-based approach and help make the cost of 

insurance more affordable and more accessible using free-market 

approaches rather than providing federal subsidies that I think the 

High Risk Pool must somewhat look at what we might expect in 

the future where you have premiums being artificially held down 

by companies who are pressured by HHS and then ultimately premiums aren’t covering the cost of the type of care that is being provided, and as a regulator, one of our primary concerns is, of course, 

solvency of the companies. Consumers are severely harmed if companies don’t have enough capital or reserves to stay in business to 

pay those claims and ultimately it is the consumer who will suffer. 

So my preference would be back to a market-based approach that 

reduces the cost of premiums for everyone and makes it more affordable and more accessible that way. 

Mr. PITTS. Would you continue to elaborate on what efforts Ohio 

is undertaking to reform health care in Ohio? 

Ms. TAYLOR. Yes, Mr. Chairman. Well, as I stated in my testimony, unfortunately, a lot of what we see in the ACA is not dealing 

with the root of the problem which is how you actually drive down 

the costs of health care. Really, it is more just insurance regulation 

or changes in insurance regulation. In Ohio, we have our Medicare 

and Medicaid groups working together so that they are coordinating the coverage of individuals that are eligible under both 

plans in order to save money. We have an office of health transformation that is working with individual providers, hospital providers across the country to help better coordinate care between 

those that receive services for mental health, for example, and then 

also how they receive services for physical health, doing a better 

job of coordinating those services to help drive down costs using 

technology to look at how we provide better care for patients, higher quality at lower cost. So working both on the Medicaid side but 

also then working on the private-sector side by partnering with 

providers across the State. And ultimately it has allowed us to hold 

down the increases that we would have otherwise seen in Medicaid 

108 

so that we can have more flexibility with how we manage the Medicaid program and also the Governor has broken out in this most 

recent budget separately identified our Medicare director as a cabinet-level director versus working for a different agency. 

Mr. PITTS. Now, based on the problems you have dealt with already, could similar regulatory problems occur? Do you foresee 

your State having additional problems with the implementation of 

the Affordable Care Act once the law is fully implemented? 

Ms. TAYLOR. Mr. Chairman, I guess if we look back at our experience with the High Risk Pool, and I guess the statement is pretty 

much true that if you want an indication of the future, look at the 

past. Of course, we are concerned about disagreements with federal 

regulators both as a State regulator but then how does that impact 

consumers? Ultimately it impacts consumers, impacts companies, 

creates uncertainty in the market, which makes it much more difficult from an administrative perspective for all of us to deal with 

the difficult issues. 

Of course, we are concerned about the premium increases and 

the costs that that will bring. If you look at Ohio’s High Risk Pool 

just as an example, we have about 3,500 people covered in our 

High Risk Pool and the costs ultimately we are projecting, costs 

being paid for by the federal government, somewhere between $135 

million and $140 million to provide subsidies for that care. So of 

course, we have a cost issue. And then of course, I have already 

stated the concern we have with artificially holding down premiums that ultimately puts at risk the companies that are there 

to pay the provider claims and pay the claims for consumers. 

Mr. PITTS. Thank you. I want to sneak one more question in 

here. 

Ms. Zurface, your situation is not a special case. Can you talk a 

little bit about the number of patients who you reference in your 

written testimony who are facing the same government barriers as 

you do? 

Ms. ZURFACE. My situation is not a special case, and I think that 

is why I am here is because it is becoming almost the rule as opposed to the exception, especially now that there is not the funding 

available for this preexisting condition insurance program available 

right now. I believe that we submitted about eight different testimonies in the written transcript that was provided to you. Each 

one of those people is obviously too sick to be before you today, 

which is why I am representing those people as well. The problem 

that we have in trying to identify how many people are being affected is, we are only aware of the people who are being affected 

when they contact us directly, so we don’t know who is having 

trouble, who got kicked out of the program, who applied too late 

to be permitted into the program. We don’t know those numbers 

right now. I do know that the Leukemia and Lymphoma Society is 

working on making sure that we can have additional data to submit to the committee and we would be happy to provide more written information to you, but at this time the only people that we 

have direct information on are the ones whose stories are already 

in the record. 

109 

Mr. PITTS. Now, how did you hear about the Leukemia and 

Lymphoma Society and how have they helped you through this trying time? 

Ms. ZURFACE. I had a magnificent experience with the Leukemia 

and Lymphoma Society. In 2005, shortly after my grandmother had 

been diagnosed with non-Hodgkin’s lymphoma, I joined the Leukemia and Lymphoma Society’s Team in Training and became an 

advocate and a fundraiser for them through cycling, so I did that 

for a season and then many of my friends that I met through that 

excursion remained advocates for Team in Training. So I was already familiar with the Leukemia and Lymphoma Society when I 

received my diagnosis in January, and they were one of the first 

resources that I looked up to determine whether there would be 

any type of premium assistance available in the event—as I am 

self-employed, one of the things that does happen is, I can’t say I 

have X amount of dollars available for monthly income, so on a 

month-to-month basis my income may change and fluctuate so I 

may have a good month followed by a bad month, and I am sure 

that a lot of people who are self-employed understand exactly what 

I mean by that. So what I would need is something to fall back on, 

a fallback position, to even be able to make those premiums on a 

regular basis to make sure that I don’t have a lapse in care once 

I am able to become insured, so I was researching that issue and 

came back in contact with the Leukemia and Lymphoma Society, 

who actually provided a symposium in March in Cincinnati, and I 

attended that symposium and reconnected with the agency. So they 

do have a lot of resources available for people in my situation. 

Mr. PITTS. Thank you, and again, thank you for sharing your 

personal experience and representing the other patients that you 

have referenced. 

Dr. Burgess, you are recognized for another 5-minute round. 

Mr. BURGESS. Thank you, Mr. Chairman. Are you sure you want 

to do this? 

Let me just ask Ms. Zurface, you are a lawyer. You followed 

what happened in the Supreme Court last year, and a lot of the 

argument that was brought against the Affordable Care Act was 

based upon the constitutionality of using the Commerce Clause to 

compel the purchase of health insurance. Now, had the individual 

mandate existed 4 years ago, would you have had health insurance? 

Ms. ZURFACE. If the individual mandate had existed 3 years ago, 

it would appear that I would have been mandated to have insurance, so by nature, yes, I would have to say I would have had insurance 3 years ago prior to the time that I would have been diagnosed with this. 

Mr. BURGESS. Except that those things that were a barrier for 

you to purchase insurance 3 years ago would still have been a barrier. I mean, the cost. You yourself point out how your income can 

fluctuate quite a bit during the year. One could even visualize a 

scenario where at one point you might be eligible for the Ohio Medicaid expansion, under 138 percent of the federal poverty level. At 

another point when you get a lot of work, you might be making too 

much money to qualify even for the subsidies in the exchange. And 

of course, as you know, people who then earn more income than 

110 

would have allowed them to receive a subsidy. You don’t know 

going into a year what kind of year you don’t know going into a 

year what kind of year you are going to have, do you? 

Ms. ZURFACE. Not, not at all. 

Mr. BURGESS. As far as your billings and collections. So you may 

be eligible for a subsidy and receive the subsidy but, you know 

what, at the end of the year, we may ask for that subsidy back because you have had a good year. So it is not quite as straightforward as just yes, if the mandate had been there, I probably 

would have had insurance. The barriers would have still existed, 

I submit, that the very things that prevented you from purchasing 

that insurance 3 years ago will in fact still be there for people who 

are now simply required to buy insurance, and some will because, 

well, it is the law, I got to do it, and others will no, it is still too 

expensive, it is still too much of a barrier, the fine is relatively 

modest, at least for several years for a single individual earning 

under a certain level, it is $600 or $700, and yes, if they catch me, 

then fine, I will pay the fine, but otherwise, I can make a payment 

on a bass boat for what I can buy insurance, and a lot of people 

are just simply going to elect not to do that. So I don’t know if we 

changed, and Mr. Miller, you are bound to have some thoughts on 

the concept of whether the individual mandate will change the behavior of people who are looking at the insurance market and are 

kept out of it because of some of the barriers that have been discussed today. 

Mr. MILLER. Well, CBO relied upon a small sample size of Massachusetts to basically make its projections on coverage take-up, 

and although they have their covered their tracks a little bit since 

then, they were assuming that people would just be good Americans obeying the law, and the mandate as a command was a big 

factor in its projections of the take-up, not just the subsidies alone. 

They haven’t really dialed back on what those assumptions are in 

terms of what would be the coverage from the mandate, which is 

now just seen as a tax, and when you see things as a tax, other 

people have looked at this and said well, you are going to make a 

financial calculation: do I pay a small tax or do I pay a much higher premium, particularly with those premiums for some individuals 

are going much higher than what it actually cost them in insurance. So there is a lot of skepticism as to how effective the weak 

mandate as it currently exists both before and after the Supreme 

Court, what it will really mean in terms of pushing people into coverage to pay much more than they ordinarily would pay. 

Mr. BURGESS. And there is still the safety net of community rating and guaranteed issue. You can buy the insurance in the emergency room or perhaps even in the ambulance on your smartphone 

on the way to the hospital after the accident. 

Mr. MILLER. Correct. We have Medicaid coverage, which is actually provided after the fact, and it has been going on for some time. 

We have signed them in surgery actually. And certainly it depends 

upon—all the regs aren’t there as to how they will handle the guaranteed issue under the Affordable Care Act, whether they will have 

a waiting period or only an enrollment period for a couple of 

months. 

111 

Let me just take a moment, because I know we are about to finish. I sit here. I would like to stand in astonishment. Ron means 

well and said a lot of nice things at the hearing. I read his report 

last summer for Families USA in July of 2012. There was no nuance in that. It was a screaming headline: nearly 65 million Americans at risk of losing their coverage but for the Affordable Care 

Act. Not one word or sentence in there about all the protections for 

people with employer-sponsored coverage. This problem of overshooting the mark and saying run for your lives, you are about to 

lose everything. HHS had a report in 2009, had over 125 million 

people at risk. It is marked down to 65 million in Ron’s report. And 

another by Commonwealth, 12.5. When the serious people look at 

this and say where is the problem, you can get to about 4 or 5 million where it actually—that is where people are not getting coverage. Now, in some cases they may get a little bit of a rate-up in 

their premiums, but we ought to talk about where the problem is 

and what the dimensions are. It is a serious enough problem without exaggerating it, and then we can deal with it in a forceful, effective way. But it is used to leverage a larger agenda, which is to 

rope everybody into something else which we wouldn’t support because you want to scare people that you are about to be at immediate risk, when that is overstated. 

Mr. POLLACK. Well, it is not people—— 

Mr. BURGESS. I am about to run out of time. In fact, I am out 

of time. But Mr. Chairman, if I could, I would just like to ask a 

question of Dr. Collins because the issue of cost has come up, and 

of course, we were tasked to fix were preexisting conditions, not 

messing up the system as it currently exists, and then to help people with cost. It looks like we failed on all three points, but on the 

aspect of cost, the Commonwealth Fund put out a paper a few 

months ago from Minnesota that talked about—I think you called 

it the activated patient where the costs were lower for someone 

who actually was an active participant in their care, and we had 

all the hearings leading up to the Affordable Care Act and we 

heard from experts on Medicaid and we heard from experts on this, 

experts on that, but we never brought on, say, Governor Mitch 

Daniels from Indiana, who with his Healthy Indiana plan and creating that activated patient population found that he brought his 

costs down significantly over a 2-year span. 

It seems like that would be a logical way to approach things. We 

are talking about States expanding Medicaid. We are not talking 

about people who are already mandatory populations, that is, people in nursing homes, people who are blind and disabled, children. 

We are talking about new coverage for basically young adults who 

are healthy. Why wouldn’t we use this activated patient model that 

the Commonwealth Fund wrote about in incorporating that expansion? 

Ms. COLLINS. You know, I think you raised a very good point, 

and I think the discussion of costs earlier is really important. I 

think the viability of the Affordable Care Act and the coverage expansions over time will depend on the affordability of the premiums, but half the law does address the underlying cost drivers 

in the system through a significant set of delivery system reforms, 

a lot of which have already gone into place. I think the law also 

112 

encourages, unlike some of the comments that have been made 

here, huge innovations at the State level, so States have enormous 

flexibility in designing their insurance exchanges if they want to do 

so. They also have primary responsibility for regulating their insurance markets, and the delivery system reforms, we are seeing a 

slowdown in health care costs over the last couple years. Part of 

that is recession related but part of that is probably structural, so 

we are seeing changes in the system that are both being driven by 

innovations like going on in Ohio, Indiana, but also some that are 

being driven by incentives and new grant funding provided under 

the Affordable Care Act. 

This is a hugely important problem for the United States. It will 

determine the viability of the coverage provisions over time. There 

are insurance market regulations that do address premium growth. 

We have already seen a huge decline in the number of premium 

rate increase requests from insurance companies because of the 

rate review program that has been in effect for the last year. The 

medical loss ratio requirement is also having a huge impact, 1.5 

million in rebates and administrative cost savings last year just as 

a result of that provision alone. So the Affordable Care Act is not 

just about coverage. In fact, over its 10-year budget projection, it 

actually reduces the overall deficit because of these additional delivery system reforms in addition to the coverage requirements. 

Mr. BURGESS. Well, Governor Daniels said in a piece in the Wall 

Street Journal several years ago now, even before while we were 

still debating the Affordable Care Act, that by providing his State 

employees with a high-deductible policy for catastrophic coverage 

and then providing them the funds to pay that high deductible 

should they be required to do so, allowing them to keep the money 

in those health savings account if they didn’t spend it, he came to 

the conclusion that something magic happens when people spend 

their own money for health care, even if it wasn’t their own money 

in the first place, and I don’t know why there has been such a resistance to accepting that lesson that he has shown so elegantly in 

Indiana and why we won’t allow it to occur in more places. 

Lieutenant Governor, I will give you the last word. I rather suspect that the flexibility that Dr. Collins spoke about is something 

that you would welcome. Is that not correct? 

Ms. TAYLOR. Mr. Chairman, Dr. Burgess, yes. I guess my comment with regard to all of the flexibility that has portended to be 

given to the States both in how exchanges are organized, if you 

read the rules and regulations, if you look at at least Ohio’s history 

with dealing the High Risk Pool, my definition of flexibility as it 

relates to dealing with HHS and CMS is, you can have as much 

flexibility as you want as long as you do it my way, and unfortunately for Ohio, we have the experience that we have had little 

flexibility, and if there was as much flexibility as is being suggested, I think you would have less concerns or issues coming from 

individual State regulators who say you tell us we can regulate our 

market, but when you disagree with what we have concluded as 

with the High Risk Pool and whether or not individual consumers 

were eligible for coverage, it was up to us until you decided no, and 

that is unfortunately the experience that we have had. 

113 

Mr. BURGESS. Thank you, Mr. Chairman. My time is expired. I 

will yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

We have other questions, but we will ask the members to submit 

their questions for the record and ask the witnesses to respond 

promptly when you receive those questions. This has been an excellent hearing, very, very important issue, and I want to thank the 

witnesses for taking time to come present their testimony. 

I remind the members they should submit their questions by the 

close of business on Wednesday, April 17. So without objection, 

with thanks to the witnesses, this subcommittee is adjourned. 

[Whereupon, at 2:26 p.m., the subcommittee was adjourned.] 

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